☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2023
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number:
1-6523
Exact name of registrant as specified in its charter:
Bank of America Corporation
State or other jurisdiction of incorporation or organization:
Delaware
IRS Employer Identification No.:
56-0906609
Address of principal executive offices:
Bank of America Corporate Center
100 N. Tryon Street
Charlotte, North Carolina28255
Registrant’s telephone number, including area code:
(704) 386-5681
Former name, former address and former fiscal year, if changed since last report:
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per share
BAC
New York Stock Exchange
Depositary Shares, each representing a 1/1,000th interest in a share
BAC PrE
New York Stock Exchange
of Floating Rate Non-Cumulative Preferred Stock, Series E
Depositary Shares, each representing a 1/1,000th interest in a share
BAC PrB
New York Stock Exchange
of 6.000% Non-Cumulative Preferred Stock, Series GG
Depositary Shares, each representing a 1/1,000th interest in a share
BAC PrK
New York Stock Exchange
of 5.875% Non-Cumulative Preferred Stock, Series HH
7.25% Non-Cumulative Perpetual Convertible Preferred Stock, Series L
BAC PrL
New York Stock Exchange
Depositary Shares, each representing a 1/1,200th interest in a share
BML PrG
New York Stock Exchange
of Bank of America Corporation Floating Rate
Non-Cumulative Preferred Stock, Series 1
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Depositary Shares, each representing a 1/1,200th interest in a share
BML PrH
New York Stock Exchange
of Bank of America Corporation Floating Rate
Non-Cumulative Preferred Stock, Series 2
Depositary Shares, each representing a 1/1,200th interest in a share
BML PrJ
New York Stock Exchange
of Bank of America Corporation Floating Rate
Non-Cumulative Preferred Stock, Series 4
Depositary Shares, each representing a 1/1,200th interest in a share
BML PrL
New York Stock Exchange
of Bank of America Corporation Floating Rate
Non-Cumulative Preferred Stock, Series 5
Floating Rate Preferred Hybrid Income Term Securities of BAC Capital
BAC/PF
New York Stock Exchange
Trust XIII (and the guarantee related thereto)
5.63% Fixed to Floating Rate Preferred Hybrid Income Term Securities
BAC/PG
New York Stock Exchange
of BAC Capital Trust XIV (and the guarantee related thereto)
Income Capital Obligation Notes initially due December 15, 2066 of
MER PrK
New York Stock Exchange
Bank of America Corporation
Senior Medium-Term Notes, Series A, Step Up Callable Notes, due
BAC/31B
New York Stock Exchange
November 28, 2031 of BofA Finance LLC (and the guarantee
of the Registrant with respect thereto)
Depositary Shares, each representing a 1/1,000th interest in a share of
BAC PrM
New York Stock Exchange
5.375% Non-Cumulative Preferred Stock, Series KK
Depositary Shares, each representing a 1/1,000th interest in a share
BAC PrN
New York Stock Exchange
of 5.000% Non-Cumulative Preferred Stock, Series LL
Depositary Shares, each representing a 1/1,000th interest in a share of
BAC PrO
New York Stock Exchange
4.375% Non-Cumulative Preferred Stock, Series NN
Depositary Shares, each representing a 1/1,000th interest in a share of
BAC PrP
New York Stock Exchange
4.125% Non-Cumulative Preferred Stock, Series PP
Depositary Shares, each representing a 1/1,000th interest in a share of
BAC PrQ
New York Stock Exchange
4.250% Non-Cumulative Preferred Stock, Series QQ
Depositary Shares, each representing a 1/1,000th interest in a share
BAC PrS
New York Stock Exchange
of 4.750% Non-Cumulative Preferred Stock, Series SS
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes☑No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes☑No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☑
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).
Yes ☐No ☑
On October 30, 2023, there were 7,913,732,014 shares of Bank of America Corporation Common Stock outstanding.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Bank of America Corporation (the “Corporation”) and its management may make certain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as “anticipates,” “targets,” “expects,” “hopes,” “estimates,” “intends,” “plans,” “goals,” “believes,” “continue” and other similar expressions or future or conditional verbs such as “will,” “may,” “might,” “should,” “would” and “could.” Forward-looking statements represent the Corporation’s current expectations, plans or forecasts of its future results, revenues, liquidity, net interest income, provision for credit losses, expenses, efficiency ratio, capital measures, strategy, deposits, assets, and future business and economic conditions more generally, and other future matters. These statements are not guarantees of future results or performance and involve certain known and unknown risks, uncertainties and assumptions that are difficult to predict and are often beyond the Corporation’s control. Actual outcomes and results may differ materially from those expressed in, or implied by, any of these forward-looking statements.
You should not place undue reliance on any forward-looking statement and should consider the following uncertainties and risks, as well as the risks and uncertainties more fully discussed under Item 1A. Risk Factors of the Corporation’s 2022 Annual Report on Form 10-K and in any of the Corporation’s subsequent Securities and Exchange Commission filings: the Corporation’s potential judgments, orders, settlements, penalties, fines and reputational damage resulting from pending or future litigation and regulatory investigations, proceedings and enforcement actions, including as a result of our participation in and execution of government programs related to the Coronavirus Disease 2019 (COVID-19) pandemic, such as the processing of unemployment benefits for California and certain other states; the possibility that the Corporation's future liabilities may be in excess of its recorded liability and estimated range of possible loss for litigation, and regulatory and government actions; the possibility that the Corporation could face increased claims from one or more parties involved in mortgage securitizations; the Corporation's ability to resolve representations and warranties repurchase and related claims; the risks related to the discontinuation of reference rates, including increased expenses and litigation and the effectiveness of hedging strategies; uncertainties about the financial stability and growth rates of non-U.S. jurisdictions, the risk that those jurisdictions may face difficulties servicing their sovereign debt, and related stresses on financial markets, currencies and trade, and the Corporation’s exposures to such risks, including direct, indirect and operational; the impact of U.S. and global interest rates, inflation, currency exchange rates, economic conditions, trade policies and tensions, including tariffs, and potential geopolitical instability; the impact of the interest rate, inflationary, macroeconomic, banking and regulatory environment on the Corporation’s assets, business,
financial condition and results of operations; the impact of adverse developments affecting the U.S. or global banking industry, including bank failures and liquidity concerns, resulting in worsening economic and market volatility, and regulatory responses thereto; the possibility that future credit losses may be higher than currently expected due to changes in economic assumptions, customer behavior, adverse developments with respect to U.S. or global economic conditions and other uncertainties, including the impact of supply chain disruptions, inflationary pressures and labor shortages on economic conditions and our business; potential losses related to the Corporation’s concentration of credit risk; the Corporation’s ability to achieve its expense targets and expectations regarding revenue, net interest income, provision for credit losses, net charge-offs, effective tax rate, loan growth or other projections; adverse changes to the Corporation’s credit ratings from the major credit rating agencies; an inability to access capital markets or maintain deposits or borrowing costs; estimates of the fair value and other accounting values, subject to impairment assessments, of certain of the Corporation’s assets and liabilities; the estimated or actual impact of changes in accounting standards or assumptions in applying those standards; uncertainty regarding the content, timing and impact of regulatory capital and liquidity requirements; the impact of adverse changes to total loss-absorbing capacity requirements, stress capital buffer requirements and/or global systemically important bank surcharges; the potential impact of actions of the Board of Governors of the Federal Reserve System on the Corporation’s capital plans; the effect of changes in or interpretations of income tax laws and regulations; the impact of implementation and compliance with U.S. and international laws, regulations and regulatory interpretations, including, but not limited to, recovery and resolution planning requirements, Federal Deposit Insurance Corporation assessments, the Volcker Rule, fiduciary standards, derivatives regulations and potential changes to loss allocations between financial institutions and customers, including for losses incurred from the use of our products and services, including Zelle, that were authorized by the customer but induced by fraud; the impact of failures or disruptions in or breaches of the Corporation’s operational or security systems, data or infrastructure, or those of third parties, including as a result of cyberattacks or campaigns; the risks related to the transition and physical impacts of climate change; our ability to achieve environmental, social and governance goals and commitments or the impact of any changes in the Corporation’s sustainability strategy or commitments generally; the impact of any future federal government shutdown and uncertainty regarding the federal government’s debt limit or changes in fiscal, monetary or regulatory policy; the emergence or continuation of widespread health emergencies or pandemics; the impact of natural disasters, extreme weather events, military conflicts (including the Russia/Ukraine conflict, the conflict in Israel and surrounding areas, the possible expansion of such conflicts and potential
Bank of America 2
geopolitical consequences), terrorism or other geopolitical events; and other matters.
Forward-looking statements speak only as of the date they are made, and the Corporation undertakes no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the date the forward-looking statement was made.
Notes to the Consolidated Financial Statements referred to in Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) are incorporated by reference into the MD&A. Certain prior-period amounts have been reclassified to conform to current-period presentation. Throughout the MD&A, the Corporation uses certain acronyms and abbreviations which are defined in the Glossary.
Executive Summary
Business Overview
The Corporation is a Delaware corporation, a bank holding company (BHC) and a financial holding company. When used in this report, “Bank of America,” “the Corporation,” “we,” “us” and “our” may refer to Bank of America Corporation individually, Bank of America Corporation and its subsidiaries, or certain of Bank of America Corporation’s subsidiaries or affiliates. Our principal executive offices are located in Charlotte, North Carolina. Through our various bank and nonbank subsidiaries throughout the U.S. and in international markets, we provide a diversified range of banking and nonbank financial services and products through four business segments: Consumer Banking, Global Wealth & Investment Management (GWIM), Global Banking and Global Markets, with the remaining operations recorded in All Other. We operate our banking activities primarily under the Bank of America, National Association (Bank of America, N.A. or BANA) charter. At September 30, 2023, the Corporation had $3.2 trillion in assets and a headcount of approximately 213,000 employees.
As of September 30, 2023, we served clients through operations across the U.S., its territories and more than 35 countries. Our retail banking footprint covers all major markets in the U.S., and we serve approximately 69 million consumer and small business clients with approximately 3,900 retail financial centers, approximately 15,000 ATMs, and leading digital banking platforms (www.bankofamerica.com) with approximately 46 million active users, including approximately 37 million active mobile users. We offer industry-leading support to approximately four million small business households. Our GWIM businesses, with client balances of $3.6 trillion, provide tailored solutions to meet client needs through a full set of investment management, brokerage, banking, trust and retirement products. We are a global leader in corporate and investment banking and trading across a broad range of asset classes serving corporations, governments, institutions and individuals around the world.
The Corporation’s website is www.bankofamerica.com, and the Investor Relations portion of our website is https://investor.bankofamerica.com. We use our website to distribute company information, including as a means of disclosing
material, non-public information and for complying with our disclosure obligations under Regulation FD. We routinely post and make accessible financial and other information, including environmental, social and governance (ESG) information, regarding the Corporation on our website. Investors should monitor our website, including the Investor Relations portion, in addition to our press releases, U.S. Securities and Exchange Commission (SEC) filings, public conference calls and webcasts. Notwithstanding the foregoing, the information contained on our website as referenced in this paragraph is not incorporated by reference into this Quarterly Report on Form 10-Q.
Recent Developments
Capital Management
The Board of Governors of the Federal Reserve System (Federal Reserve) requires BHCs to submit a capital plan and planned capital actions on an annual basis, consistent with the rules governing the Comprehensive Capital Analysis and Review (CCAR) capital plan. On July 27, 2023, the Federal Reserve released final 2023 CCAR supervisory stress test results for Bank of America. Based on the results, our stress capital buffer (SCB) declined to 2.5 percent from 3.4 percent, resulting in a Common equity tier 1 (CET1) minimum requirement of 9.5 percent effective October 1, 2023.
OnJuly 27, 2023, U.S. banking regulators issued proposed rules that would update future U.S. regulatory capital requirements, including the calculation of risk-weighted assets (RWA) and the global systemically important bank (G-SIB) surcharge. In addition, on August 29, 2023, U.S. banking regulators issued proposed rules that would update future total loss-absorbing capacity (TLAC) and eligible long-term debt requirements. For more information, see Capital Management – Regulatory Developments on page 26.
On October 18, 2023, the Corporation’s Board of Directors (the Board) declared a quarterly common stock dividend of $0.24 per share, payable on December 29, 2023 to shareholders of record as of December 1, 2023.
For more information on our capital resources, see Capital Management on page 22.
FDIC Special Assessment
As previously disclosed, in May 2023, the Federal Deposit Insurance Corporation (FDIC) issued a proposed rule that would impose a special assessment to recover the loss to the Deposit Insurance Fund arising from the protection of uninsured depositors of Silicon Valley Bank and Signature Bank associated with their closures, and the systemic risk determination announced by the FDIC in March 2023. While the timing and amount of any expense recognition are unknown until the proposed rule is finalized, if the final rule is issued as proposed, the estimated impact of the special assessment on the Corporation would be a noninterest expense of approximately $1.9 billion that would be recognized upon finalization of the rule, which could occur in the fourth quarter of 2023. For more information, see Note 10 – Commitments and Contingencies to the Consolidated Financial Statements.
3Bank of America
Financial Highlights
Table 1
Summary Income Statement and Selected Financial Data
Three Months Ended September 30
Nine Months Ended September 30
(Dollars in millions, except per share information)
2023
2022
2023
2022
Income statement
Net interest income
$
14,379
$
13,765
$
42,985
$
37,781
Noninterest income
10,788
10,737
33,637
32,637
Total revenue, net of interest expense
25,167
24,502
76,622
70,418
Provision for credit losses
1,234
898
3,290
1,451
Noninterest expense
15,838
15,303
48,114
45,895
Income before income taxes
8,095
8,301
25,218
23,072
Income tax expense
293
1,219
1,847
2,676
Net income
7,802
7,082
23,371
20,396
Preferred stock dividends
532
503
1,343
1,285
Net income applicable to common shareholders
$
7,270
$
6,579
$
22,028
$
19,111
Per common share information
Earnings
$
0.91
$
0.81
$
2.74
$
2.35
Diluted earnings
0.90
0.81
2.72
2.34
Dividends paid
0.24
0.22
0.68
0.64
Performance ratios
Return on average assets (1)
0.99
%
0.90
%
1.00
%
0.86
%
Return on average common shareholders’ equity (1)
11.24
10.79
11.63
10.58
Return on average tangible common shareholders’ equity (2)
15.47
15.21
16.09
14.93
Efficiency ratio (1)
62.93
62.45
62.79
65.17
September 30 2023
December 31 2022
Balance sheet
Total loans and leases
$
1,049,149
$
1,045,747
Total assets
3,153,090
3,051,375
Total deposits
1,884,601
1,930,341
Total liabilities
2,866,026
2,778,178
Total common shareholders’ equity
258,667
244,800
Total shareholders’ equity
287,064
273,197
(1)For definitions, see Key Metrics on page 106.
(2)Return on average tangible common shareholders’ equity is a non-GAAP financial measure. For more information and a corresponding reconciliation to the most closely related financial measures defined by accounting principles generally accepted in the United States of America (GAAP), see Non-GAAP Reconciliations on page 49.
Net income was $7.8 billion and $23.4 billion, or $0.90 and $2.72 per diluted share, for the three and nine months ended September 30, 2023 compared to $7.1 billion and $20.4 billion, or $0.81 and $2.34 per diluted share, for the same periods in 2022. The increase in net income was primarily due to higher net interest income and noninterest income, partially offset by higher noninterest expense and provision for credit losses.
Total assets increased $101.7 billion from December 31, 2022 to $3.2 trillion primarily driven by higher cash and cash equivalents to support balance sheet and liquidity positioning, as well as higher securities financing activity.
Total liabilities increased $87.8 billion from December 31, 2022 to $2.9 trillion primarily driven by higher securities financing activity and higher long-term debt and short-term borrowings to support balance sheet and liquidity positioning, partially offset by lower deposits primarily due to an increase in customer spending and debt payments, customers’ movement of balances to higher yielding investment alternatives and seasonal outflows.
Shareholders’ equity increased $13.9 billion from December 31, 2022 primarily due to an increase in net income, partially offset by returns of capital to shareholders through common and preferred stock dividends and common stock repurchases.
Net Interest Income
Net interest income increased $614 million to $14.4 billion, and $5.2 billion to $43.0 billion for the three and nine months ended September 30, 2023 compared to the same periods in 2022. Net interest yield on a fully taxable-equivalent (FTE) basis increased 5 basis points (bps) to 2.11 percent and 25 bps to 2.12 percent for the three and nine months ended September 30, 2023. The increases were primarily driven by benefits from higher interest rates and loan growth, partially offset by higher funding costs, lower deposits and net interest income related to Global Markets activity. For more information on net interest yield and FTE basis, see Supplemental Financial Data on page 7, and for more information on interest rate risk management, see Interest Rate Risk Management for the Banking Book on page 46.
Bank of America 4
Noninterest Income
Table 2
Noninterest Income
Three Months Ended September 30
Nine Months Ended September 30
(Dollars in millions)
2023
2022
2023
2022
Fees and commissions:
Card income
$
1,520
$
1,573
$
4,535
$
4,531
Service charges
1,464
1,466
4,238
5,016
Investment and brokerage services
3,963
3,795
11,654
12,178
Investment banking fees
1,188
1,167
3,563
3,752
Total fees and commissions
8,135
8,001
23,990
25,477
Market making and similar activities
3,325
3,068
11,734
9,023
Other income
(672)
(332)
(2,087)
(1,863)
Total noninterest income
$
10,788
$
10,737
$
33,637
$
32,637
Noninterest income increased $51 million to $10.8 billion and $1.0 billion to $33.6 billion for the three and nine months ended September 30, 2023 compared to the same periods in 2022. The following highlights the significant changes.
● Service charges decreased $778 million for the nine-month period primarily driven by the impact of non-sufficient funds and overdraft policy changes, as well as lower treasury service charges.
● Investment and brokerage services increased $168 million for the three-month period primarily driven by higher asset management fees due to higher average market levels and the impact of positive assets under management (AUM) flows, partially offset by lower brokerage fees. The nine-month period decreased $524 million primarily driven by lower asset management fees and brokerage fees due to lower average equity and fixed income market levels and transactional volumes, partially offset by the impact of positive AUM flows.
● Investment banking fees decreased $189 million for the nine-month period primarily due to lower debt issuance and advisory fees, partially offset by higher equity issuance fees.
● Market making and similar activities increased $257 million and $2.7 billion primarily driven by improved trading in credit and mortgage products in Fixed Income, Currencies and Commodities (FICC) and by the impact of higher interest rates on client financing activities in Equities.
● Other income decreased $340 million and $224 million primarily due to higher partnership losses on ESG investments and losses on sales of available-for-sale (AFS) debt securities in the nine-month period, partially offset by certain negative valuation adjustments in the prior-year periods.
Provision for Credit Losses
The provision for credit losses increased $336 million to $1.2 billion and $1.8 billion to $3.3 billion for the three and nine months ended September 30, 2023 compared to the same periods in 2022. The provision for credit losses for the current-year periods was driven by our consumer portfolio primarily due to credit card loan growth and asset quality, partially offset by certain improved macroeconomic conditions that primarily benefited our commercial portfolio. In addition, provision for credit losses for the three months ended September 30, 2023 benefited from commercial net paydowns.For the three-month period in the prior year, the provision for credit losses was primarily driven by loan growth and a dampened macroeconomic outlook, and the nine-month period in the prior year was driven by the same factors as well as a reserve build related to Russian exposure, partially offset by asset quality improvement and reduced COVID-19 pandemic uncertainties. For more information on the provision for credit losses, see Allowance for Credit Losses on page 42.
5Bank of America
Noninterest Expense
Table 3
Noninterest Expense
Three Months Ended September 30
Nine Months Ended September 30
(Dollars in millions)
2023
2022
2023
2022
Compensation and benefits
$
9,551
$
8,887
$
28,870
$
27,286
Occupancy and equipment
1,795
1,777
5,370
5,285
Information processing and communications
1,676
1,546
5,017
4,621
Product delivery and transaction related
880
892
2,726
2,749
Marketing
501
505
1,472
1,365
Professional fees
545
525
1,609
1,493
Other general operating
890
1,171
3,050
3,096
Total noninterest expense
$
15,838
$
15,303
$
48,114
$
45,895
Noninterest expense increased $535 million to $15.8 billion for the three months ended September 30, 2023 compared to the same period in 2022 primarily due to higher investments in people and technology, higher FDIC expense and costs related to a liquidating business activity, partially offset by lower litigation expense. For the nine months ended September 30,
2023, noninterest expense increased $2.2 billion to $48.1 billion compared to the same period in 2022 primarily due to higher investments in people and technology and higher FDIC expense, partially offset by lower litigation expense and revenue-related compensation.
Income Tax Expense
Table 4
Income Tax Expense
Three Months Ended September 30
Nine Months Ended September 30
(Dollars in millions)
2023
2022
2023
2022
Income before income taxes
$
8,095
$
8,301
$
25,218
$
23,072
Income tax expense
293
1,219
1,847
2,676
Effective tax rate
3.6
%
14.7
%
7.3
%
11.6
%
The effective tax rates for the three and nine months ended September 30, 2023 and 2022 were primarily driven by our recurring tax preference benefits that mainly consist of tax credits from ESG investments in affordable housing and renewable energy. The three and nine months ended September 30, 2023 also included discrete benefits of $212 million and $422 million primarily related to certain U.S. state law changes
in the three-month period, as well as other discrete benefits primarily related to resolution of U.S. federal and state tax matters in the nine-month period. Absent the ESG tax credits and discrete tax benefits, the effective tax rates would have been 25 percent for both the three months ended September 30, 2023 and 2022, and 26 percent and 25 percent for the nine months ended September 30, 2023 and 2022.
Bank of America 6
Supplemental Financial Data
Non-GAAP Financial Measures
In this Form 10-Q, we present certain non-GAAP financial measures. Non-GAAP financial measures exclude certain items or otherwise include components that differ from the most directly comparable measures calculated in accordance with GAAP. Non-GAAP financial measures are provided as additional useful information to assess our financial condition, results of operations (including period-to-period operating performance) or compliance with prospective regulatory requirements. These non-GAAP financial measures are not intended as a substitute for GAAP financial measures and may not be defined or calculated the same way as non-GAAP financial measures used by other companies.
When presented on a consolidated basis, we view net interest income on an FTE basis as a non-GAAP financial measure. To derive the FTE basis, net interest income is adjusted to reflect tax-exempt income on an equivalent before-tax basis with a corresponding increase in income tax expense. For purposes of this calculation, we use the federal statutory tax rate of 21 percent and a representative state tax rate. Net interest yield, which measures the basis points we earn over the cost of funds, utilizes net interest income on an FTE basis. We believe that presentation of these items on an FTE basis allows for comparison of amounts from both taxable and tax-exempt sources and is consistent with industry practices.
We may present certain key performance indicators and ratios excluding certain items (e.g., debit valuation adjustment (DVA) gains (losses)), which result in non-GAAP financial measures. We believe that the presentation of measures that exclude these items is useful because such measures provide additional information to assess the underlying operational performance and trends of our businesses and to allow better comparison of period-to-period operating performance.
We also evaluate our business based on certain ratios that utilize tangible equity, a non-GAAP financial measure. Tangible equity represents shareholders’ equity or common shareholders’ equity reduced by goodwill and intangible assets (excluding mortgage servicing rights (MSRs)), net of related deferred tax liabilities (“adjusted” shareholders’ equity or common shareholders’ equity). These measures are used to evaluate our use of equity. In addition, profitability, relationship and investment models use both return on average tangible
common shareholders’ equity and return on average tangible shareholders’ equity as key measures to support our overall growth objectives. These ratios are:
● Return on average tangible common shareholders’ equity measures our net income applicable to common shareholders as a percentage of adjusted average common shareholders’ equity. The tangible common equity ratio represents adjusted ending common shareholders’ equity divided by total tangible assets.
● Return on average tangible shareholders’ equity measures our net income as a percentage of adjusted average total shareholders’ equity. The tangible equity ratio represents adjusted ending shareholders’ equity divided by total tangible assets.
● Tangible book value per common share represents adjusted ending common shareholders’ equity divided by ending common shares outstanding.
We believe ratios utilizing tangible equity provide additional useful information because they present measures of those assets that can generate income. Tangible book value per common share provides additional useful information about the level of tangible assets in relation to outstanding shares of common stock.
The aforementioned supplemental data and performance measures are presented in Table 5 on page 8.
For more information on the reconciliation of these non-GAAP financial measures to the corresponding GAAP financial measures, see Non-GAAP Reconciliations on page 49.
Key Performance Indicators
We present certain key financial and nonfinancial performance indicators (key performance indicators) that management uses when assessing our consolidated and/or segment results. We believe they are useful to investors because they provide additional information about our underlying operational performance and trends. These key performance indicators (KPIs) may not be defined or calculated in the same way as similar KPIs used by other companies. For information on how these metrics are defined, see Key Metrics on page 106.
Our consolidated key performance indicators, which include various equity and credit metrics, are presented in Table 1 on page 4 and Table 5 on page 8.
For information on key segment performance metrics, see Business Segment Operations on page 11.
7Bank of America
Table 5
Selected Financial Data
Nine Months Ended
2023 Quarters
2022 Quarters
September 30
(In millions, except per share information)
Third
Second
First
Fourth
Third
2023
2022
Income statement
Net interest income
$
14,379
$
14,158
$
14,448
$
14,681
$
13,765
$
42,985
$
37,781
Noninterest income
10,788
11,039
11,810
9,851
10,737
33,637
32,637
Total revenue, net of interest expense
25,167
25,197
26,258
24,532
24,502
76,622
70,418
Provision for credit losses
1,234
1,125
931
1,092
898
3,290
1,451
Noninterest expense
15,838
16,038
16,238
15,543
15,303
48,114
45,895
Income before income taxes
8,095
8,034
9,089
7,897
8,301
25,218
23,072
Income tax expense
293
626
928
765
1,219
1,847
2,676
Net income
7,802
7,408
8,161
7,132
7,082
23,371
20,396
Net income applicable to common shareholders
7,270
7,102
7,656
6,904
6,579
22,028
19,111
Average common shares issued and outstanding
8,017.1
8,040.9
8,065.9
8,088.3
8,107.7
8,041.3
8,122.2
Average diluted common shares issued and outstanding
8,075.9
8,080.7
8,182.3
8,155.7
8,160.8
8,153.4
8,173.3
Performance ratios
Return on average assets (1)
0.99
%
0.94
%
1.07
%
0.92
%
0.90
%
1.00
%
0.86
%
Four-quarter trailing return on average assets (2)
0.98
0.96
0.92
0.88
0.87
n/a
n/a
Return on average common shareholders’ equity (1)
11.24
11.21
12.48
11.24
10.79
11.63
10.58
Return on average tangible common shareholders’ equity (3)
15.47
15.49
17.38
15.79
15.21
16.09
14.93
Return on average shareholders’ equity (1)
10.86
10.52
11.94
10.38
10.37
11.10
10.12
Return on average tangible shareholders’ equity (3)
14.41
14.00
15.98
13.98
13.99
14.78
13.68
Total ending equity to total ending assets
9.10
9.07
8.77
8.95
8.77
9.10
8.77
Common equity ratio (1)
8.20
8.16
7.88
8.02
7.82
8.20
7.82
Total average equity to total average assets
9.11
8.89
8.95
8.87
8.73
8.99
8.54
Dividend payout (1)
26.39
24.88
23.17
25.71
27.06
24.78
27.15
Per common share data
Earnings
$
0.91
$
0.88
$
0.95
$
0.85
$
0.81
$
2.74
$
2.35
Diluted earnings
0.90
0.88
0.94
0.85
0.81
2.72
2.34
Dividends paid
0.24
0.22
0.22
0.22
0.22
0.68
0.64
Book value (1)
32.65
32.05
31.58
30.61
29.96
32.65
29.96
Tangible book value (3)
23.79
23.23
22.78
21.83
21.21
23.79
21.21
Market capitalization
$
216,942
$
228,188
$
228,012
$
264,853
$
242,338
$
216,942
$
242,338
Average balance sheet
Total loans and leases
$
1,046,254
$
1,046,608
$
1,041,352
$
1,039,247
$
1,034,334
Total assets
3,128,466
3,175,358
3,096,058
3,074,289
3,105,546
Total deposits
1,876,153
1,875,353
1,893,649
1,925,544
1,962,775
Long-term debt
245,819
248,480
244,759
243,871
250,204
Common shareholders’ equity
256,578
254,028
248,855
243,647
241,882
Total shareholders’ equity
284,975
282,425
277,252
272,629
271,017
Asset quality
Allowance for credit losses (4)
$
14,640
$
14,338
$
13,951
$
14,222
$
13,817
Nonperforming loans, leases and foreclosed properties (5)
4,993
4,274
4,083
3,978
4,156
Allowance for loan and lease losses as a percentage of total loans and leases outstanding (5)
1.27
%
1.24
%
1.20
%
1.22
%
1.20
%
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases (5)
275
314
319
333
309
Net charge-offs
$
931
$
869
$
807
$
689
$
520
Annualized net charge-offs as a percentage of average loans and leases outstanding (5)
0.35
%
0.33
%
0.32
%
0.26
%
0.20
%
Capital ratios at period end (6)
Common equity tier 1 capital
11.9
%
11.6
%
11.4
%
11.2
%
11.0
%
Tier 1 capital
13.6
13.3
13.1
13.0
12.8
Total capital
15.4
15.1
15.0
14.9
14.7
Tier 1 leverage
7.3
7.1
7.1
7.0
6.8
Supplementary leverage ratio
6.2
6.0
6.0
5.9
5.8
Tangible equity (3)
7.0
7.0
6.7
6.8
6.6
Tangible common equity (3)
6.1
6.1
5.8
5.9
5.7
Total loss-absorbing capacity and long-term debt metrics
Total loss-absorbing capacity to risk-weighted assets
29.3
%
28.8
%
28.8
%
29.0
%
28.9
%
Total loss-absorbing capacity to supplementary leverage exposure
13.3
13.0
13.1
13.2
13.0
Eligible long-term debt to risk-weighted assets
14.8
14.6
14.8
15.2
15.2
Eligible long-term debt to supplementary leverage exposure
6.7
6.6
6.7
6.9
6.8
(1)For definitions, see Key Metrics on page 106.
(2)Calculated as total net income for four consecutive quarters divided by annualized average assets for four consecutive quarters.
(3)Tangible equity ratios and tangible book value per share of common stock are non-GAAP financial measures. For more information on these ratios and corresponding reconciliations to GAAP financial measures, see Supplemental Financial Data on page 7 and Non-GAAP Reconciliations on page 49.
(4)Includes the allowance for loan and lease losses and the reserve for unfunded lending commitments.
(5)Balances and ratios do not include loans accounted for under the fair value option. For additional exclusions from nonperforming loans, leases and foreclosed properties, see Consumer Portfolio Credit Risk Management – Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity on page 35 and corresponding Table 25 and Commercial Portfolio Credit Risk Management – Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity on page 39 and corresponding Table 31.
(6)For more information, including which approach is used to assess capital adequacy, see Capital Management on page 22.
n/a = not applicable
Bank of America 8
Table 6
Quarterly Average Balances and Interest Rates - FTE Basis
Average Balance
Interest Income/
Expense (1)
Yield/ Rate
Average Balance
Interest
Income/
Expense (1)
Yield/ Rate
(Dollars in millions)
Third Quarter 2023
Third Quarter 2022
Earning assets
Interest-bearing deposits with the Federal Reserve, non-U.S. central
banks and other banks
$
353,183
$
4,613
5.18
%
$
184,263
$
848
1.83
%
Time deposits placed and other short-term investments
8,629
113
5.20
10,352
34
1.33
Federal funds sold and securities borrowed or purchased under
agreements to resell
287,403
4,888
6.75
278,059
1,446
2.06
Trading account assets
191,283
2,244
4.66
163,744
1,465
3.55
Debt securities
752,569
4,685
2.47
901,654
4,259
1.88
Loans and leases (2)
Residential mortgage
229,001
1,745
3.04
228,474
1,616
2.83
Home equity
25,661
390
6.04
27,282
229
3.32
Credit card
98,049
2,727
11.03
85,009
2,187
10.20
Direct/Indirect and other consumer
104,134
1,354
5.16
108,300
923
3.38
Total consumer
456,845
6,216
5.41
449,065
4,955
4.39
U.S. commercial
377,728
5,061
5.32
377,183
3,427
3.60
Non-U.S. commercial
123,781
2,088
6.69
127,793
1,028
3.19
Commercial real estate (3)
74,088
1,364
7.30
66,707
738
4.39
Commercial lease financing
13,812
166
4.79
13,586
124
3.65
Total commercial
589,409
8,679
5.84
585,269
5,317
3.61
Total loans and leases
1,046,254
14,895
5.65
1,034,334
10,272
3.94
Other earning assets
99,378
2,339
9.35
98,172
1,403
5.67
Total earning assets
2,738,699
33,777
4.90
2,670,578
19,727
2.94
Cash and due from banks
25,772
27,250
Other assets, less allowance for loan and lease losses
363,995
407,718
Total assets
$
3,128,466
$
3,105,546
Interest-bearing liabilities
U.S. interest-bearing deposits
Demand and money market deposits
$
942,368
$
4,304
1.81
%
$
981,145
$
832
0.34
%
Time and savings deposits
271,425
2,149
3.14
164,313
193
0.47
Total U.S. interest-bearing deposits
1,213,793
6,453
2.11
1,145,458
1,025
0.35
Non-U.S. interest-bearing deposits
97,095
887
3.63
79,383
210
1.05
Total interest-bearing deposits
1,310,888
7,340
2.22
1,224,841
1,235
0.40
Federal funds purchased and securities loaned or sold under agreements
to repurchase
294,878
5,342
7.19
211,346
1,338
2.51
Short-term borrowings and other interest-bearing liabilities
140,513
2,287
6.45
137,253
926
2.68
Trading account liabilities
48,084
510
4.21
46,507
383
3.27
Long-term debt
245,819
3,766
6.10
250,204
1,974
3.14
Total interest-bearing liabilities
2,040,182
19,245
3.75
1,870,151
5,856
1.24
Noninterest-bearing sources
Noninterest-bearing deposits
565,265
737,934
Other liabilities (4)
238,044
226,444
Shareholders’ equity
284,975
271,017
Total liabilities and shareholders’ equity
$
3,128,466
$
3,105,546
Net interest spread
1.15
%
1.70
%
Impact of noninterest-bearing sources
0.96
0.36
Net interest income/yield on earning assets (5)
$
14,532
2.11
%
$
13,871
2.06
%
(1)Includes the impact of interest rate risk management contracts. For more information, see Interest Rate Risk Management for the Banking Book on page 46.
(2)Nonperforming loans are included in the respective average loan balances. Income on these nonperforming loans is generally recognized on a cost recovery basis.
(3)Includes U.S. commercial real estate loans of $67.9 billion and $62.5 billion, and non-U.S. commercial real estate loans of $6.2 billion and $4.2 billion for the third quarter of 2023 and 2022.
(4)Includes $41.1 billion and $29.2 billion of structured notes and liabilities for the third quarter of 2023 and 2022.
(5)Net interest income includes FTE adjustments of $153 million and $106 million for the third quarter of 2023 and 2022.
9Bank of America
Table 7
Year-to-Date Average Balances and Interest Rates - FTE Basis
Average Balance
Interest Income/ Expense (1)
Yield/ Rate
Average Balance
Interest Income/ Expense (1)
Yield/ Rate
Nine Months Ended September 30
(Dollars in millions)
2023
2022
Earning assets
Interest-bearing deposits with the Federal Reserve, non-U.S. central
banks and other banks
$
305,526
$
10,915
4.78
%
$
202,293
$
1,216
0.80
%
Time deposits placed and other short-term investments
10,153
350
4.61
9,091
58
0.86
Federal funds sold and securities borrowed or purchased under
agreements to resell
289,823
13,555
6.25
293,971
1,835
0.83
Trading account assets
187,481
6,375
4.54
154,428
3,802
3.29
Debt securities
791,339
14,887
2.50
940,808
12,164
1.72
Loans and leases (2)
Residential mortgage
229,010
5,133
2.99
227,010
4,712
2.77
Home equity
26,041
1,060
5.44
27,492
684
3.32
Credit card
94,775
7,658
10.80
81,505
6,081
9.97
Direct/Indirect and other consumer
104,896
3,814
4.86
107,204
2,198
2.74
Total consumer
454,722
17,665
5.19
443,211
13,675
4.12
U.S. commercial
377,873
14,318
5.07
362,669
8,079
2.98
Non-U.S. commercial
125,525
5,815
6.19
124,965
2,228
2.38
Commercial real estate (3)
72,927
3,811
6.99
64,295
1,601
3.33
Commercial lease financing
13,709
462
4.50
14,071
334
3.17
Total commercial
590,034
24,406
5.53
566,000
12,242
2.89
Total loans and leases
1,044,756
42,071
5.38
1,009,211
25,917
3.43
Other earning assets
98,857
6,902
9.33
108,968
2,813
3.45
Total earning assets
2,727,935
95,055
4.66
2,718,770
47,805
2.35
Cash and due from banks
26,544
28,116
Other assets, less allowance for loan and lease losses
378,936
409,771
Total assets
$
3,133,415
$
3,156,657
Interest-bearing liabilities
U.S. interest-bearing deposits
Demand and money market deposits
$
956,165
$
10,659
1.49
%
$
989,364
$
1,101
0.15
%
Time and savings deposits
233,079
4,520
2.59
161,707
275
0.23
Total U.S. interest-bearing deposits
1,189,244
15,179
1.71
1,151,071
1,376
0.16
Non-U.S. interest-bearing deposits
95,187
2,260
3.17
80,235
343
0.57
Total interest-bearing deposits
1,284,431
17,439
1.82
1,231,306
1,719
0.19
Federal funds purchased and securities loaned or sold under agreements
to repurchase
291,349
14,700
6.75
214,404
1,871
1.17
Short-term borrowings and other interest-bearing liabilities
153,653
7,464
6.49
132,873
834
0.84
Trading account liabilities
45,675
1,486
4.35
54,852
1,117
2.72
Long-term debt
246,357
10,559
5.72
247,357
4,168
2.25
Total interest-bearing liabilities
2,021,465
51,648
3.41
1,880,792
9,709
0.69
Noninterest-bearing sources
Noninterest-bearing deposits
597,224
775,278
Other liabilities (4)
233,147
231,073
Shareholders’ equity
281,579
269,514
Total liabilities and shareholders’ equity
$
3,133,415
$
3,156,657
Net interest spread
1.25
%
1.66
%
Impact of noninterest-bearing sources
0.87
0.21
Net interest income/yield on earning assets (5)
$
43,407
2.12
%
$
38,096
1.87
%
(1)Includes the impact of interest rate risk management contracts. For more information, see Interest Rate Risk Management for the Banking Book on page 46.
(2)Nonperforming loans are included in the respective average loan balances. Income on these nonperforming loans is generally recognized on a cost recovery basis.
(3)Includes U.S. commercial real estate loans of $67.2 billion and $60.0 billion and non-U.S. commercial real estate loans of $5.8 billion and $4.3 billion for the nine months ended September 30, 2023 and 2022.
(4)Includes $39.5 billion and $29.7 billion of structured notes and liabilities for the nine months ended September 30, 2023 and 2022.
(5)Net interest income includes FTE adjustments of $422 million and $315 million for the nine months ended September 30, 2023 and 2022.
Bank of America 10
Business Segment Operations
Segment Description and Basis of Presentation
We report our results of operations through four business segments: Consumer Banking, GWIM, Global Banking and Global Markets, with the remaining operations recorded in All Other. We manage our segments and report their results on an FTE basis. For more information, see Business Segment Operations in the MD&A of the Corporation’s 2022 Annual Report on Form 10-K.
We periodically review capital allocated to our businesses and allocate capital annually during the strategic and capital planning processes. We utilize a methodology that considers the effect of regulatory capital requirements in addition to internal risk-based capital models. The capital allocated to the business segments is referred to as allocated capital. Allocated equity in the reporting units is comprised of allocated capital
plus capital for the portion of goodwill and intangibles specifically assigned to the reporting unit. For more information, including the definition of a reporting unit, see Note 7 – Goodwill and Intangible Assets to the Consolidated Financial Statements.
For more information on our presentation of financial information on an FTE basis, see Supplemental Financial Data on page 7, and for reconciliations to consolidated total revenue, net income and period-end total assets, see Note 17 – Business Segment Information to the Consolidated Financial Statements.
Key Performance Indicators
We present certain key financial and nonfinancial performance indicators that management uses when evaluating segment results. We believe they are useful to investors because they provide additional information about our segments’ operational performance, customer trends and business growth.
Consumer Banking
Deposits
Consumer Lending
Total Consumer Banking
Three Months Ended September 30
(Dollars in millions)
2023
2022
2023
2022
2023
2022
% Change
Net interest income
$
5,571
$
5,006
$
2,820
$
2,778
$
8,391
$
7,784
8
%
Noninterest income:
Card income
(11)
(10)
1,336
1,341
1,325
1,331
—
Service charges
605
597
—
—
605
597
1
All other income
116
141
35
51
151
192
(21)
Total noninterest income
710
728
1,371
1,392
2,081
2,120
(2)
Total revenue, net of interest expense
6,281
5,734
4,191
4,170
10,472
9,904
6
Provision for credit losses
128
173
1,269
565
1,397
738
89
Noninterest expense
3,240
3,141
2,016
1,956
5,256
5,097
3
Income before income taxes
2,913
2,420
906
1,649
3,819
4,069
(6)
Income tax expense
729
593
226
404
955
997
(4)
Net income
$
2,184
$
1,827
$
680
$
1,245
$
2,864
$
3,072
(7)
Effective tax rate (1)
25.0
%
24.5
%
Net interest yield
2.26
%
1.87
%
3.65
%
3.76
%
3.26
%
2.79
%
Return on average allocated capital
63
56
10
18
27
30
Efficiency ratio
51.60
54.78
48.06
46.92
50.18
51.47
Balance Sheet
Three Months Ended September 30
Average
2023
2022
2023
2022
2023
2022
% Change
Total loans and leases
$
4,139
$
4,153
$
306,622
$
291,078
$
310,761
$
295,231
5
%
Total earning assets (2)
975,968
1,064,585
306,982
293,366
1,019,980
1,106,513
(8)
Total assets (2)
1,009,390
1,096,911
312,731
300,374
1,059,152
1,145,846
(8)
Total deposits
974,674
1,063,075
5,377
6,018
980,051
1,069,093
(8)
Allocated capital
13,700
13,000
28,300
27,000
42,000
40,000
5
(1)Estimated at the segment level only.
(2)In segments and businesses where the total of liabilities and equity exceeds assets, we allocate assets from All Other to match the segments’ and businesses’ liabilities and allocated shareholders’ equity. As a result, total earning assets and total assets of the businesses may not equal total Consumer Banking.
n/m = not meaningful
11Bank of America
Deposits
Consumer Lending
Total Consumer Banking
Nine Months Ended September 30
(Dollars in millions)
2023
2022
2023
2022
2023
2022
% Change
Net interest income
$
17,120
$
13,535
$
8,301
$
8,016
$
25,421
$
21,551
18
%
Noninterest income:
Card income
(31)
(27)
3,971
3,863
3,940
3,836
3
Service charges
1,727
2,118
2
2
1,729
2,120
(18)
All other income
490
264
122
82
612
346
77
Total noninterest income
2,186
2,355
4,095
3,947
6,281
6,302
—
Total revenue, net of interest expense
19,306
15,890
12,396
11,963
31,702
27,853
14
Provision for credit losses
414
388
3,339
648
3,753
1,036
n/m
Noninterest expense
10,082
9,204
6,100
5,773
16,182
14,977
8
Income before income taxes
8,810
6,298
2,957
5,542
11,767
11,840
(1)
Income tax expense
2,203
1,543
739
1,358
2,942
2,901
1
Net income
$
6,607
$
4,755
$
2,218
$
4,184
$
8,825
$
8,939
(1)
Effective tax rate (1)
25.0
%
24.5
%
Net interest yield
2.29
%
1.70
%
3.66
%
3.73
%
3.26
2.61
Return on average allocated capital
64
49
11
21
28
30
Efficiency ratio
52.23
57.92
49.21
48.26
51.05
53.77
Balance Sheet
Nine Months Ended September 30
Average
2023
2022
2023
2022
2023
2022
% Change
Total loans and leases
$
4,113
$
4,171
$
302,978
$
285,501
$
307,091
$
289,672
6
%
Total earning assets (2)
1,000,143
1,062,668
303,266
287,422
1,043,476
1,104,653
(6)
Total assets (2)
1,033,618
1,095,830
309,435
294,193
1,083,120
1,144,587
(5)
Total deposits
998,947
1,061,876
5,094
5,909
1,004,041
1,067,785
(6)
Allocated capital
13,700
13,000
28,300
27,000
42,000
40,000
5
Period end
September 30 2023
December 31 2022
September 30 2023
December 31 2022
September 30 2023
December 31 2022
% Change
Total loans and leases
$
4,165
$
4,148
$
309,051
$
300,613
$
313,216
$
304,761
3
%
Total earning assets (2)
978,133
1,043,049
309,527
300,787
1,023,162
1,085,079
(6)
Total assets (2)
1,010,771
1,077,203
315,765
308,007
1,062,038
1,126,453
(6)
Total deposits
976,007
1,043,194
6,295
5,605
982,302
1,048,799
(6)
See page 11 for footnotes.
Consumer Banking, comprised of Deposits and Consumer Lending, offers a diversified range of credit, banking and investment products and services to consumers and small businesses. For more information about Consumer Banking, see Business Segment Operations in the MD&A of the Corporation’s 2022 Annual Report on Form 10-K.
Consumer Banking Results
Three-Month Comparison
Net income for Consumer Banking decreased $208 million to $2.9 billiondue to an increase in provision for credit losses and higher noninterest expense, partially offset by higher revenue. Net interest income increased $607 million to $8.4 billion primarily driven by higher interest rates and loan balances. Noninterest income decreased $39 million to $2.1 billion, relatively unchanged from the same period a year ago.
The provision for credit losses increased $659 million to $1.4 billion primarily driven by credit card loan growth and asset quality.
Noninterest expense increased $159 million to $5.3 billion primarily driven by higher FDIC expense.
The return on average allocated capital was 27 percent, down from 30 percent, due to an increase in allocated capital
and lower net income. For more information on capital allocated to the business segments, see Business Segment Operations on page 11.
Nine-Month Comparison
Net income for Consumer Banking decreased $114 million to $8.8 billion due to an increase in provision for credit losses and higher noninterest expense, partially offset by higher revenue. Net interest income increased $3.9 billion to $25.4 billion primarily due to the same factors as described in the three-month discussion. Noninterest income decreased $21 million to $6.3 billion, relatively unchanged from the same period a year ago.
The provision for credit losses increased $2.7 billion to $3.8 billionprimarily driven by credit card loan growth and asset quality, whereas the prior-year period benefited from reduced COVID-19 pandemic uncertainties. Noninterest expense increased $1.2 billion to $16.2 billion primarily due to continued investments in the business, including people and technology, higher litigation expense, including consumer regulatory matters, and higher FDIC expense.
The return on average allocated capital was 28 percent, down from 30 percent, primarily due an increase in allocated capital.
Bank of America 12
Deposits
Three-Month Comparison
Net income for Deposits increased $357 million to $2.2 billion primarily due to higher revenue, partially offset by higher noninterest expense. Net interest income increased $565 million to $5.6 billion primarily due to higher interest rates. Noninterest income decreased $18 million to $710 million, relatively unchanged from the same period a year ago.
Noninterest expense increased $99 million to $3.2 billion primarily driven by higher FDIC expense.
Average deposits decreased $88.4 billion to $974.7 billion primarily due to net outflows of $68.4 billion in money market savings and $36.2 billion in checking, partially offset by growth in time deposits of $25.8 billion. The change in average deposits was primarily due to higher interest rates and client activity.
Nine-Month Comparison
Net income for Deposits increased $1.9 billion to $6.6 billion primarily due to higher revenue, partially offset by higher
noninterest expense. Net interest income increased $3.6 billion to $17.1 billion primarily due to the same factor as described in the three-month discussion. Noninterest income decreased $169 million to $2.2 billion primarily due to the impact of non-sufficient funds and overdraft policy changes. Noninterest expense increased $878 million to $10.1 billion primarily driven by continued investments in the business, including people and technology, higher litigation expense, including consumer regulatory matters, and higher FDIC expense.
Average deposits decreased $62.9 billion to $998.9 billion primarily due to net outflows of $42.9 billion in money market savings and $25.9 billion in checking, partially offset by growth in time deposits of $13.7 billion. The change in average deposits was primarily driven by the same factors as described in the three-month discussion.
The table below provides key performance indicators for Deposits. Management uses these metrics, and we believe they are useful to investors because they provide additional information to evaluate our deposit profitability and digital/ mobile trends.
Key Statistics – Deposits
Three Months Ended September 30
Nine Months Ended September 30
2023
2022
2023
2022
Total deposit spreads (excludes noninterest costs) (1)
2.76%
1.88%
2.66%
1.74%
Period end
Consumer investment assets (in millions) (2)
$
387,467
$
302,413
Active digital banking users (in thousands) (3)
45,797
43,496
Active mobile banking users (in thousands) (4)
37,487
34,922
Financial centers
3,862
3,932
ATMs
15,253
15,572
(1)Includes deposits held in Consumer Lending.
(2)Includes client brokerage assets, deposit sweep balances, Bank of America, N.A. brokered CDs and AUM in Consumer Banking.
(3)Represents mobile and/or online active users over the past 90 days.
(4)Represents mobile active users over the past 90 days.
Consumer investment assets increased $85.1 billion to $387.5 billion driven by client flows and market performance. Active mobile banking users increased approximately three million, reflecting continuing changes in our clients’ banking preferences. We had a net decrease of 70 financial centers and 319 ATMs as we continue to optimize our consumer banking network.
Consumer Lending
Three-Month Comparison
Net income for Consumer Lending decreased $565 million to $680 million primarily due to an increase in provision for credit losses. Net interest income increased $42 million to $2.8 billion, relatively unchanged from the same period a year ago. Noninterest income decreased $21 million to $1.4 billion, relatively unchanged from the same period a year ago.
The provision for credit losses increased $704 million to $1.3 billion primarily driven by credit card loan growth and asset quality. Noninterest expense increased $60 million to $2.0 billion, relatively unchanged from the same period a year ago.
Average loans increased $15.5 billion to $306.6 billion primarily driven by an increase in credit card loans.
Nine-Month Comparison
Net income for Consumer Lending decreased $2.0 billion to $2.2 billion primarily due to an increase in provision for credit losses. Net interest income increased $285 million to $8.3 billion primarily due to higher loan balances. Noninterest income increased $148 million to $4.1 billion primarily due to higher card income.
The provision for credit losses increased $2.7 billion to $3.3 billion primarily driven by credit card loan growth and asset quality, whereas the prior-year period benefited from reduced COVID-19 pandemic uncertainties. Noninterest expense increased $327 million to $6.1 billion primarily driven by continued investments in the business.
Average loans increased $17.5 billion to $303.0 billion primarily driven by the same factor as described in the three-month discussion.
The table below provides key performance indicators for Consumer Lending. Management uses these metrics, and we believe they are useful to investors because they provide additional information about loan growth and profitability.
13Bank of America
Key Statistics – Consumer Lending
Three Months Ended September 30
Nine Months Ended September 30
(Dollars in millions)
2023
2022
2023
2022
Total credit card (1)
Gross interest yield (2)
12.03
%
10.71
%
11.85
%
10.14
%
Risk-adjusted margin (3)
7.70
10.07
8.06
10.13
New accounts (in thousands)
1,062
1,256
3,386
3,301
Purchase volumes
$
91,711
$
91,064
$
270,358
$
263,788
Debit card purchase volumes
$
133,553
$
127,135
$
390,891
$
373,426
(1)Includes GWIM's credit card portfolio.
(2)Calculated as the effective annual percentage rate divided by average loans.
(3)Calculated as the difference between total revenue, net of interest expense, and net credit losses divided by average loans.
During the three and nine months ended September 30, 2023, the total risk-adjusted margin decreased 237 bps and 207 bps primarily driven by higher net credit losses, lower net interest margin and lower fee income. During the three and nine
months ended September 30, 2023 total credit card purchase volumes increased $647 million and $6.6 billion, and debit card purchase volumes increased $6.4 billion and $17.5 billion, reflecting higher levels of consumer spending.
Key Statistics – Loan Production (1)
Three Months Ended September 30
Nine Months Ended September 30
(Dollars in millions)
2023
2022
2023
2022
Consumer Banking:
First mortgage
$
2,547
$
4,028
$
7,392
$
18,695
Home equity
2,035
1,999
6,389
5,875
Total (2):
First mortgage
$
5,596
$
8,724
$
15,473
$
39,548
Home equity
2,421
2,420
7,559
6,995
(1)The loan production amounts represent the unpaid principal balance of loans and, in the case of home equity, the principal amount of the total line of credit.
(2)In addition to loan production in Consumer Banking, there is also first mortgage and home equity loan production in GWIM.
First mortgage loan originations for Consumer Banking and the total Corporation decreased $1.5 billion and $3.1 billion during the three months ended September 30, 2023 primarily driven by higher interest rates, resulting in lower customer demand. During the nine months ended September 30, 2023, first mortgage loan originations for Consumer Banking and the total Corporation decreased $11.3 billion and $24.1 billion primarily driven by lower demand.
Home equity production in Consumer Banking and the total Corporation remained relatively unchanged during the three months ended September 30, 2023 compared to the same period a year ago. During the nine months ended September 30, 2023, Consumer Banking and the total Corporation increased $514 million and $564 million primarily driven by higher demand.
Bank of America 14
Global Wealth & Investment Management
Three Months Ended September 30
Nine Months Ended September 30
(Dollars in millions)
2023
2022
% Change
2023
2022
% Change
Net interest income
$
1,755
$
1,981
(11)
%
$
5,436
$
5,451
—
%
Noninterest income:
Investment and brokerage services
3,396
3,255
4
9,885
10,395
(5)
All other income
170
193
(12)
557
492
13
Total noninterest income
3,566
3,448
3
10,442
10,887
(4)
Total revenue, net of interest expense
5,321
5,429
(2)
15,878
16,338
(3)
Provision for credit losses
(6)
37
(116)
32
29
10
Noninterest expense
3,950
3,816
4
11,942
11,706
2
Income before income taxes
1,377
1,576
(13)
3,904
4,603
(15)
Income tax expense
344
386
(11)
976
1,128
(13)
Net income
$
1,033
$
1,190
(13)
$
2,928
$
3,475
(16)
Effective tax rate
25.0
%
24.5
%
25.0
%
24.5
%
Net interest yield
2.16
2.12
2.19
1.84
Return on average allocated capital
22
27
21
27
Efficiency ratio
74.28
70.28
75.21
71.65
Balance Sheet
Three Months Ended September 30
Nine Months Ended September 30
Average
2023
2022
% Change
2023
2022
% Change
Total loans and leases
$
218,569
$
223,734
(2)
%
$
219,530
$
218,030
1
%
Total earning assets
322,032
370,733
(13)
331,738
395,023
(16)
Total assets
335,124
383,468
(13)
344,709
407,819
(15)
Total deposits
291,770
339,487
(14)
300,308
362,611
(17)
Allocated capital
18,500
17,500
6
18,500
17,500
6
Period end
September 30 2023
December 31 2022
% Change
Total loans and leases
$
218,913
$
223,910
(2)
%
Total earning assets
320,196
355,461
(10)
Total assets
333,779
368,893
(10)
Total deposits
290,732
323,899
(10)
GWIM consists of two primary businesses: Merrill Wealth Management andBank of America Private Bank. For more information about GWIM, see Business Segment Operations in the MD&A of the Corporation’s 2022 Annual Report on Form 10-K.
Three-Month Comparison
Net income for GWIM decreased $157 million to $1.0 billion primarily due to higher noninterest expense and lower revenue. The operating margin was 26 percent compared to 29 percent a year ago.
Net interest income decreased $226 million to $1.8 billion primarily driven by lower deposit balances and a mix shift to higher yielding deposit products.
Noninterest income, which primarily includes investment and brokerage services income, increased $118 million to $3.6 billion. The increase was primarily driven by higher asset management fees due to higher average market levels and the impact of positive AUM flows, partially offset by lower brokerage fees.
Noninterest expense increased $134 million to $4.0 billion primarily due to continued investments in the business, including strategic hiring, as well as higher FDIC expense.
The return on average allocated capital was 22 percent, down from 27 percent, due to lower net income and, to a lesser extent, a small increase in allocated capital.
Average loans decreased $5.2 billion to $218.6 billion primarily driven by securities-based lending and custom lending, partially offset by residential mortgage. Average deposits decreased $47.7 billion to $291.8 billion primarily driven by
clients moving deposits to higher yielding investment alternatives, including offerings on our investment and brokerage platforms.
Merrill Wealth Management revenue of $4.4 billion decreased three percent primarily driven by lower net interest income from lower deposit balances and a mix shift to higher yielding deposit products, as well as lower brokerage fees, partially offset by higher asset management fees from higher market levels and the impact of positive AUM flows.
Bank of America Private Bank revenue of $923 million increased two percent primarily driven by higher asset management fees from higher market levels and the impact of positive AUM flows.
Nine-Month Comparison
Net income for GWIM decreased $547 million to $2.9 billion primarily due to lower revenue and higher noninterest expense. The operating margin was 25 percent compared to 28 percent a year ago.
Net interest income was $5.4 billion, relatively unchanged from the same period a year ago.
Noninterest income, which primarily includes investment and brokerage services income, decreased $445 million to $10.4 billion primarily driven by lower asset management fees and brokerage fees due to lower average equity and fixed income market levels and transactional volumes, partially offset by the impact of positive AUM flows.
Noninterest expense increased $236 million to $11.9 billion due to continued investments in the business, including
15Bank of America
strategic hiring, as well as higher FDIC expense, partially offset by lower revenue-related incentives.
The return on average allocated capital was 21 percent, down from 27 percent, due to lower net income and, to a lesser extent, a small increase in allocated capital.
Average loans increased $1.5 billion to $219.5 billion primarily driven by residential mortgage and custom lending, mostly offset by securities-based lending. Average deposits decreased $62.3 billion to $300.3 billion due to the same factors as described in the three-month discussion.
Merrill Wealth Management revenue of $13.1 billion decreased four percent primarily driven by lower asset management fees and brokerage fees due to lower average equity and fixed income market levels and transactional volumes, partially offset by the impact of positive AUM flows.
Bank of America Private Bank revenue of $2.7 billion increased two percent primarily driven by the same factors as described in the three-month discussion, as well as higher net interest income due to higher interest rates.
Key Indicators and Metrics
Three Months Ended September 30
Nine Months Ended September 30
(Dollars in millions)
2023
2022
2023
2022
Revenue by Business
Merrill Wealth Management
$
4,398
$
4,524
$
13,135
$
13,649
Bank of America Private Bank
923
905
2,743
2,689
Total revenue, net of interest expense
$
5,321
$
5,429
$
15,878
$
16,338
Client Balances by Business, at period end
Merrill Wealth Management
$
2,978,229
$
2,710,985
Bank of America Private Bank
572,624
537,771
Total client balances
$
3,550,853
$
3,248,756
Client Balances by Type, at period end
Assets under management
$
1,496,601
$
1,329,557
Brokerage and other assets
1,578,123
1,413,946
Deposits
290,732
324,859
Loans and leases (1)
221,684
228,129
Less: Managed deposits in assets under management
(36,287)
(47,735)
Total client balances
$
3,550,853
$
3,248,756
Assets Under Management Rollforward
Assets under management, beginning of period
$
1,531,042
$
1,411,344
$
1,401,474
$
1,638,782
Net client flows
14,226
4,110
43,784
20,680
Market valuation/other
(48,667)
(85,897)
51,343
(329,905)
Total assets under management, end of period
$
1,496,601
$
1,329,557
$
1,496,601
$
1,329,557
Total wealth advisors, at period end (2)
19,130
18,841
(1)Includes margin receivables which are classified in customer and other receivables on the Consolidated Balance Sheet.
(2)Includes advisors across all wealth management businesses in GWIM and Consumer Banking.
Client Balances
Client balances increased $302.1 billion, or nine percent, to $3.6 trillion at September 30, 2023 compared to September 30, 2022. The increase in client balances was primarily due to the impact of higher end-of-period market valuations and positive client flows.
Bank of America 16
Global Banking
Three Months Ended September 30
Nine Months Ended September 30
(Dollars in millions)
2023
2022
% Change
2023
2022
% Change
Net interest income
$
3,613
$
3,326
9
%
$
11,210
$
8,304
35
%
Noninterest income:
Service charges
754
771
(2)
2,203
2,590
(15)
Investment banking fees
743
726
2
2,129
2,298
(7)
All other income
1,093
768
42
3,326
2,599
28
Total noninterest income
2,590
2,265
14
7,658
7,487
2
Total revenue, net of interest expense
6,203
5,591
11
18,868
15,791
19
Provision for credit losses
(119)
170
n/m
(347)
492
n/m
Noninterest expense
2,804
2,651
6
8,563
8,133
5
Income before income taxes
3,518
2,770
27
10,652
7,166
49
Income tax expense
950
734
29
2,876
1,899
51
Net income
$
2,568
$
2,036
26
$
7,776
$
5,267
48
Effective tax rate
27.0
%
26.5
%
27.0
%
26.5
%
Net interest yield
2.68
2.53
2.84
2.05
Return on average allocated capital
21
18
21
16
Efficiency ratio
45.22
47.41
45.38
51.50
Balance Sheet
Three Months Ended September 30
Nine Months Ended September 30
Average
2023
2022
% Change
2023
2022
% Change
Total loans and leases
$
376,214
$
384,305
(2)
%
$
380,076
$
373,547
2
%
Total earning assets
534,153
521,555
2
528,205
541,670
(2)
Total assets
601,378
585,683
3
595,329
605,884
(2)
Total deposits
504,432
495,154
2
498,224
514,612
(3)
Allocated capital
49,250
44,500
11
49,250
44,500
11
Period end
September 30 2023
December 31 2022
% Change
Total loans and leases
$
373,351
$
379,107
(2)
%
Total earning assets
521,423
522,539
—
Total assets
588,578
588,466
—
Total deposits
494,938
498,661
(1)
n/m = not meaningful
Global Banking, which includes Global Corporate Banking, Global Commercial Banking, Business Banking and Global Investment Banking, provides a wide range of lending-related products and services, integrated working capital management and treasury solutions, and underwriting and advisory services through our network of offices and client relationship teams. For more information about Global Banking, see Business Segment Operations in the MD&A of the Corporation’s 2022 Annual Report on Form 10-K.
Three-Month Comparison
Net income for Global Banking increased $532 million to $2.6 billion driven by higher revenue and lower provision for credit losses, partially offset by higher noninterest expense.
Net interest income increased $287 million to $3.6 billion predominantly due to the benefit of higher interest rates.
Noninterest income increased $325 million to $2.6 billion driven by higher revenue from ESG investment activities and negative valuation adjustments on leveraged loans in the prior-year period.
The provision for credit losses improved $289 million to a benefit of $119 million primarily driven by a reserve release due to net loan paydowns and an improved macroeconomic outlook in the current-year period compared to a reserve build in the prior-year period due to a dampened macroeconomic outlook.
Noninterest expense increased $153 million to $2.8 billion, primarily due to continued investments in the business, including people, and higher FDIC expense.
The return on average allocated capital was 21 percent, up from 18 percent, due to higher net income, partially offset by higher allocated capital. For more information on capital allocated to the business segments, see Business Segment Operations on page 11.
Nine-Month Comparison
Net income for Global Banking increased $2.5 billion to $7.8 billion driven by higher revenue and lower provision for credit losses, partially offset by higher noninterest expense.
Net interest income increased $2.9 billion to $11.2 billion due to the same factor as described in the three-month discussion.
Noninterest income increased $171 million to $7.7 billion driven by higher revenue from ESG investment activities and negative valuation adjustments on leveraged loans in the prior-year period, partially offset by lower treasury service charges and lower investment banking fees.
The provision for credit losses improved $839 million to a benefit of $347 million primarily due to the same factors as described in the three-month discussion. In addition, the prior-year period was impacted by a reserve build related to Russian exposure.
Noninterest expense increased $430 million to $8.6 billion, primarily due to continued investments in the business,
17Bank of America
including technology and strategic hiring in 2022, and higher FDIC expense, partially offset by expenses recognized for certain regulatory matters in the prior-year period.
The return on average allocated capital was 21 percent, up from 16 percent, due to higher net income, partially offset by higher allocated capital.
Global Corporate, Global Commercial and Business Banking
The following table and discussion present a summary of the results, which exclude certain investment banking and Paycheck Protection Program (PPP) activities in Global Banking.
Global Corporate, Global Commercial and Business Banking
Global Corporate Banking
Global Commercial Banking
Business Banking
Total
Three Months Ended September 30
(Dollars in millions)
2023
2022
2023
2022
2023
2022
2023
2022
Revenue
Business Lending
$
1,300
$
902
$
1,262
$
1,111
$
61
$
66
$
2,623
$
2,079
Global Transaction Services
1,392
1,369
998
1,112
379
322
2,769
2,803
Total revenue, net of interest expense
$
2,692
$
2,271
$
2,260
$
2,223
$
440
$
388
$
5,392
$
4,882
Balance Sheet
Average
Total loans and leases
$
169,384
$
177,166
$
194,604
$
193,828
$
12,071
$
12,697
$
376,059
$
383,691
Total deposits
272,007
241,289
182,040
198,479
50,381
55,386
504,428
495,154
Global Corporate Banking
Global Commercial Banking
Business Banking
Total
Nine Months Ended September 30
(Dollars in millions)
2023
2022
2023
2022
2023
2022
2023
2022
Revenue
Business Lending
$
3,693
$
2,908
$
3,765
$
3,128
$
191
$
186
$
7,649
$
6,222
Global Transaction Services
4,424
3,456
3,172
2,981
1,161
835
8,757
7,272
Total revenue, net of interest expense
$
8,117
$
6,364
$
6,937
$
6,109
$
1,352
$
1,021
$
16,406
$
13,494
Balance Sheet
Average
Total loans and leases
$
172,964
$
173,740
$
194,496
$
185,981
$
12,397
$
12,799
$
379,857
$
372,520
Total deposits
266,425
247,924
180,850
209,583
50,951
57,106
498,226
514,613
Period end
Total loans and leases
$
166,974
$
172,806
$
194,318
$
191,739
$
11,932
$
12,663
$
373,224
$
377,208
Total deposits
266,481
242,837
179,914
187,899
48,537
53,572
494,932
484,308
Business Lending revenue increased $544 million for the three months ended September 30, 2023 compared to the same period in 2022 primarily driven by higher interest rates and higher revenue from ESG investment activities. Business Lending revenue increased $1.4 billion for the nine months ended September 30, 2023 compared to the same period in 2022 primarily driven by higher interest rates, higher revenue from ESG investment activities and the impact of higher average loan balances.
Global Transaction Services revenue decreased $34 million to $2.8 billion for the three months ended September 30, 2023, relatively unchanged from the same period a year ago. Global Transaction Services revenue increased $1.5 billion for the nine months ended September 30, 2023 primarily driven by higher interest rates, partially offset by lower treasury service charges and the impact of lower average deposit balances.
Average loans and leases decreased two percent for the three months ended September 30, 2023 due to paydowns and increased two percent for the nine months ended September
30, 2023 due to client demand. Average deposits increased two percent for the three months ended September 30, 2023 due to international growth and decreased three percent for the nine months ended September 30, 2023 due to declines in domestic balances.
Global Investment Banking
Client teams and product specialists underwrite and distribute debt, equity and loan products, and provide advisory services and tailored risk management solutions. The economics of certain investment banking and underwriting activities are shared primarily between Global Banking and Global Markets under an internal revenue-sharing arrangement. Global Banking originates certain deal-related transactions with our corporate and commercial clients that are executed and distributed by Global Markets. To provide a complete discussion of our consolidated investment banking fees, the following table presents total Corporation investment banking fees and the portion attributable to Global Banking.
Bank of America 18
Investment Banking Fees
Global Banking
Total Corporation
Global Banking
Total Corporation
Three Months Ended September 30
Nine Months Ended September 30
(Dollars in millions)
2023
2022
2023
2022
2023
2022
2023
2022
Products
Advisory
$
396
$
397
$
448
$
432
$
1,042
$
1,197
$
1,186
$
1,297
Debt issuance
255
273
570
616
808
915
1,814
2,109
Equity issuance
92
56
232
156
279
186
687
520
Gross investment banking fees
743
726
1,250
1,204
2,129
2,298
3,687
3,926
Self-led deals
(19)
(17)
(62)
(37)
(39)
(74)
(124)
(174)
Total investment banking fees
$
724
$
709
$
1,188
$
1,167
$
2,090
$
2,224
$
3,563
$
3,752
Total Corporation investment banking fees, which exclude self-led deals and are primarily included within Global Banking and Global Markets, were $1.2 billion and $3.6 billion for the three and nine months ended September 30, 2023. The three-month period increased two percent compared to the same period in
2022 primarily due to higher equity issuance and advisory fees, partially offset by lower debt issuance fees. The nine-month period decreased five percent compared to the same period in 2022 primarily due to lower debt issuance and advisory fees, partially offset by higher equity issuance fees.
Global Markets
Three Months Ended September 30
Nine Months Ended September 30
(Dollars in millions)
2023
2022
% Change
2023
2022
% Change
Net interest income
$
674
$
743
(9)
%
$
1,080
$
2,717
(60)
%
Noninterest income:
Investment and brokerage services
475
457
4
1,507
1,520
(1)
Investment banking fees
463
430
8
1,435
1,473
(3)
Market making and similar activities
3,195
2,874
11
11,002
8,721
26
All other income
135
(21)
n/m
415
(154)
n/m
Total noninterest income
4,268
3,740
14
14,359
11,560
24
Total revenue, net of interest expense
4,942
4,483
10
15,439
14,277
8
Provision for credit losses
(14)
11
n/m
(71)
24
n/m
Noninterest expense
3,235
3,023
7
9,935
9,249
7
Income before income taxes
1,721
1,449
19
5,575
5,004
11
Income tax expense
473
384
23
1,533
1,326
16
Net income
$
1,248
$
1,065
17
$
4,042
$
3,678
10
Effective tax rate
27.5
%
26.5
%
27.5
%
26.5
%
Return on average allocated capital
11
10
12
12
Efficiency ratio
65.47
67.42
64.35
64.78
Balance Sheet
Three Months Ended September 30
Nine Months Ended September 30
2023
2022
% Change
2023
2022
% Change
Average
Trading-related assets:
Trading account securities
$
307,990
$
308,514
—
%
$
321,607
$
301,690
7
%
Reverse repurchases
135,401
112,828
20
133,912
127,527
5
Securities borrowed
119,936
114,032
5
118,912
115,898
3
Derivative assets
46,417
57,017
(19)
44,477
53,098
(16)
Total trading-related assets
609,744
592,391
3
618,908
598,213
3
Total loans and leases
131,298
120,435
9
128,317
114,505
12
Total earning assets
655,971
591,883
11
647,386
600,477
8
Total assets
863,653
847,899
2
870,366
857,747
1
Total deposits
31,890
38,820
(18)
33,725
41,448
(19)
Allocated capital
45,500
42,500
7
45,500
42,500
7
Period end
% Change
September 30 2023
December 31 2022
% Change
Total trading-related assets
6
%
$
613,009
$
564,769
9
%
Total loans and leases
3
134,386
127,735
5
Total earning assets
9
660,172
587,772
12
Total assets
5
864,792
812,489
6
Total deposits
(15)
31,041
39,077
(21)
n/m = not meaningful
19Bank of America
Global Markets offers sales and trading services and research services to institutional clients across fixed-income, credit, currency, commodity and equity businesses. Global Markets product coverage includes securities and derivative products in both the primary and secondary markets. For more information about Global Markets, see Business Segment Operations in the MD&A of the Corporation’s 2022 Annual Report on Form 10-K.
The following explanations for current period-over-period changes for Global Markets, including those disclosed under Sales and Trading Revenue, are the same for amounts including and excluding net DVA. Amounts excluding net DVA are a non-GAAP financial measure. For more information on net DVA, see Supplemental Financial Data on page 7.
Three-Month Comparison
Net income for Global Markets increased $183 million to $1.2 billion. Net DVA losses were $16 million in the current-year period compared to losses of $14 million in the prior-year period. Excluding net DVA, net income increased $184 million to $1.3 billion. These increases were primarily driven by higher revenue, partially offset by higher noninterest expense.
Revenue increased $459 million to $4.9 billion primarily due to higher sales and trading revenue in the current-year period and negative valuation adjustments on leveraged loans in the prior-year period. Sales and trading revenue increased $313 million, and excluding net DVA, sales and trading revenue increased $315 million. These increases were driven by a strong performance in FICC and Equities.
Noninterest expense increased $212 million to $3.2 billion primarily driven by continued investments in the business, including people and technology.
Average total assets increased $15.8 billion to $863.7 billion driven by higher levels of inventory, increased secured financing activity and loan growth in FICC, partially offset by lower levels of inventory in Equities.
The return on average allocated capital was 11 percent, up from 10 percent, reflecting higher net income partially offset by an increase in allocated capital. For more information on capital allocated to the business segments, see Business Segment Operations on page 11.
Nine-Month Comparison
Net income for Global Markets increased $364 million to $4.0 billion. Net DVA losses were $104 million compared to gains of $213 million in the prior-year period. Excluding net DVA, net income increased $605 million to $4.1 billion. These increases were primarily driven by higher revenue, partially offset by higher noninterest expense.
Revenue increased $1.2 billion to $15.4 billion primarily due to the same factors as described in the three-month discussion. Sales and trading revenue increased $793 million, and excluding net DVA, sales and trading revenue increased $1.1 billion. These increases were driven by higher revenue in FICC, partially offset by lower revenue in Equities.
Noninterest expense increased $686 million to $9.9 billion primarily driven by the same factors as described in the three-month discussion, partially offset by expenses recognized for certain regulatory matters in the prior-year period.
Average total assets increased $12.6 billion to $870.4 billion due to the same factors as described in the three-month discussion. Period-end total assets increased $52.3 billion from December 31, 2022 to $864.8 billion driven by higher levels of inventory, increased secured financing activity and loan growth in FICC, partially offset by lower levels of inventory in Equities.
The return on average allocated capital was 12 percent, unchanged from the same period a year ago.
Sales and Trading Revenue
For a description of sales and trading revenue, see Business Segment Operations in the MD&A of the Corporation’s 2022 Annual Report on Form 10-K. The following table and related discussion present sales and trading revenue, substantially all of which is in Global Markets, with the remainder in Global Banking. In addition, the following table and related discussion also present sales and trading revenue, excluding net DVA, which is a non-GAAP financial measure. For more information on net DVA, see Supplemental Financial Data on page 7.
Sales and Trading Revenue (1, 2, 3)
Three Months Ended September 30
Nine Months Ended September 30
(Dollars in millions)
2023
2022
2023
2022
Sales and trading revenue
Fixed income, currencies and commodities
$
2,710
$
2,552
$
8,817
$
7,760
Equities
1,695
1,540
4,940
5,204
Total sales and trading revenue
$
4,405
$
4,092
$
13,757
$
12,964
Sales and trading revenue, excluding net DVA (4)
Fixed income, currencies and commodities
$
2,723
$
2,567
$
8,916
$
7,555
Equities
1,698
1,539
4,945
5,196
Total sales and trading revenue, excluding net DVA
$
4,421
$
4,106
$
13,861
$
12,751
(1)For more information on sales and trading revenue, see Note 3 – Derivatives to the Consolidated Financial Statements.
(2)Includes FTE adjustments of $109 million and $285 million for the three and nine months ended September 30, 2023 compared to $58 million and $253 million for the same periods in 2022.
(3) Includes Global Banking sales and trading revenue of $133 million and $464 million for the three and nine months ended September 30, 2023 compared to $287 million and $785 million for the same periods in 2022.
(4) FICC and Equities sales and trading revenue, excluding net DVA, is a non-GAAP financial measure. FICC net DVA gains (losses) were $(13) million and $(99) million for the three and nine months ended September 30, 2023 compared to $(15) million and $205 million for the same periods in 2022. Equities net DVA gains (losses) were $(3) million and $(5) million for the three and nine months ended September 30, 2023 compared to $1 million and $8 million for the same periods in 2022.
Three-Month Comparison
Including and excluding net DVA, FICC revenue increased $158 million and $156 million primarily driven by an improved trading environment for credit and mortgage products, partially offset by
weaker trading in currency and interest rate products. Including and excluding net DVA, Equities revenue increased $155 million and $159 million driven by an increase in client financing activities.
Bank of America 20
Nine-Month Comparison
Including and excluding net DVA, FICC revenue increased $1.1 billion and $1.4 billion primarily driven by an improved trading environment for credit and mortgage products and an increase
in secured financing activity. Including and excluding net DVA, Equities revenue decreased $264 million and $251 million driven by weaker trading performance in derivatives, partially offset by an increase in client financing activities.
All Other
Three Months Ended September 30
Nine Months Ended September 30
(Dollars in millions)
2023
2022
% Change
2023
2022
% Change
Net interest income
$
99
$
37
n/m
$
260
$
73
n/m
Noninterest income (loss)
(1,717)
(836)
105
%
(5,103)
(3,599)
42
%
Total revenue, net of interest expense
(1,618)
(799)
103
(4,843)
(3,526)
37
Provision for credit losses
(24)
(58)
(59)
(77)
(130)
(41)
Noninterest expense
593
716
(17)
1,492
1,830
(18)
Loss before income taxes
(2,187)
(1,457)
50
(6,258)
(5,226)
20
Income tax benefit
(2,276)
(1,176)
94
(6,058)
(4,263)
42
Net income (loss)
$
89
$
(281)
(132)
$
(200)
$
(963)
(79)
Balance Sheet
Three Months Ended September 30
Nine Months Ended September 30
Average
2023
2022
% Change
2023
2022
% Change
Total loans and leases
$
9,412
$
10,629
(11)
%
$
9,742
$
13,457
(28)
%
Total assets (1)
269,159
142,650
89
239,891
140,620
71
Total deposits
68,010
20,221
n/m
45,357
20,128
125
Period end
September 30 2023
December 31 2022
% Change
Total loans and leases
$
9,283
$
10,234
(9)
%
Total assets (1)
303,903
155,074
96
Total deposits
85,588
19,905
n/m
(1)In segments where the total of liabilities and equity exceeds assets, which are generally deposit-taking segments, we allocate assets from All Other to those segments to match liabilities (i.e., deposits) and allocated shareholders’ equity. Average allocated assets were $955.7 billion and $981.8 billion for the three and nine months ended September 30, 2023 compared to $1.1 trillion and $1.1 trillion for the same periods in 2022, and period-end allocated assets were $945.7 billion and $1.0 trillion at September 30, 2023 and December 31 2022.
n/m = not meaningful
All Other primarily consists of asset and liability management (ALM) activities, liquidating businesses and certain expenses not otherwise allocated to a business segment. ALM activities encompass interest rate and foreign currency risk management activities for which substantially all of the results are allocated to our business segments. For more information on our ALM activities, see Note 17 – Business Segment Informationto the Consolidated Financial Statements.
Three-Month Comparison
Results for All Other improved $370 million to net income of $89 million from a net loss in the prior-year period, reflecting a higher income tax benefit and lower noninterest expense, mostly offset by lower noninterest income.
Noninterest income decreased $881 million primarily due to higher partnership losses for ESG investments.
Noninterest expense decreased $123 million primarily driven by higher litigation expense in the prior-year period due to a legacy monoline insurance litigation settlement, partially offset by higher costs related to a liquidating business activity in the current-year period.
The income tax benefit increased $1.1 billion, reflecting an increase in tax preference benefits primarily due to income tax
credits related to ESG investment activity. Both periods included income tax benefit adjustments to eliminate the FTE treatment of certain tax credits recorded in Global Banking and Global Markets.
Nine-Month Comparison
The net loss in All Otherdecreased $763 million to $200 million primarily due to a higher income tax benefit and lower noninterest expense, partially offset by lower noninterest income.
Noninterest income decreased $1.5 billion primarily due to higher partnership losses for ESG investments and losses on sales of AFS debt securities, partially offset by derivative gains related to risk management activities.
Noninterest expense decreased $338 million primarily due to the same factors as described in the three-month discussion and expenses recognized for certain regulatory matters in the prior-year period.
The income tax benefit increased $1.8 billion primarily due to the same factor as described in the three-month discussion. Both periods included income tax benefit adjustments to eliminate the FTE treatment of certain tax credits recorded in Global Banking and Global Markets.
21Bank of America
Managing Risk
Risk is inherent in all our business activities. The seven key types of risk faced by the Corporation are strategic, credit, market, liquidity, compliance, operational and reputational. Sound risk management enables us to serve our customers and deliver for our shareholders. If not managed well, risk can result in financial loss, regulatory sanctions and penalties, and damage to our reputation, each of which may adversely impact our ability to execute our business strategies. We take a comprehensive approach to risk management with a defined Risk Framework and an articulated Risk Appetite Statement, which are approved annually by the Enterprise Risk Committee and the Board.
Our Risk Framework serves as the foundation for the consistent and effective management of risks facing the Corporation. The Risk Framework sets forth roles and responsibilities for the management of risk and provides a blueprint for how the Board, through delegation of authority to committees and executive officers, establishes risk appetite and associated limits for our activities.
Our risk appetite provides a common framework that includes a set of measures to assist senior management and the Board in assessing the Corporation’s risk profile against our risk appetite and risk capacity. Our risk appetite is formally articulated in the Risk Appetite Statement, which includes both qualitative statements and quantitative limits.
For more information on the Corporation’s risks, see Item 1A. Risk Factors of the Corporation’s 2022 Annual Report on Form 10-K. These risks are being managed within our Risk Framework and supporting risk management programs. For more information on our Risk Framework, risk management activities and the key types of risk faced by the Corporation, see the Managing Risk section in the MD&A of the Corporation’s 2022 Annual Report on Form 10-K.
Capital Management
The Corporation manages its capital position so that its capital is more than adequate to support its business activities and aligns with risk, risk appetite and strategic planning. For more information, including related regulatory requirements, see Capital Management in the MD&A of the Corporation’s 2022 Annual Report on Form 10-K.
CCAR and Capital Planning
The Federal Reserve requires BHCs to submit a capital plan and planned capital actions on an annual basis, consistent with the rules governing the CCAR capital plan. Based on 2023 stress test results, our SCB is 2.5 percent effective October 1, 2023. For more information, see Executive Summary – Recent Developments – Capital Management on page 3.
In October 2021, the Board authorized the Corporation’s $25 billion common stock repurchase program (October 2021 Authorization). Additionally, the Board authorized common stock repurchases to offset shares awarded under the Corporation’s equity-based compensation plans. Pursuant to the Board’s authorizations, during the third quarter of 2023, we repurchased $1.0 billion of common stock, including repurchases to offset shares awarded under equity-based compensation plans. In September 2023, the Board modified the October 2021 Authorization, effective October 1, 2023, to include repurchases to offset shares awarded under equity-based compensation plans when determining the remaining repurchase authority. As of October 1, 2023, the remaining repurchase authority was approximately $13.6 billion (including repurchases to offset shares awarded under equity-based compensation plans).
The timing and amount of common stock repurchases are subject to various factors, including the Corporation’s capital position, liquidity, financial performance and alternative uses of capital, stock trading price, regulatory requirements and general market conditions, and may be suspended at any time. Such repurchases may be effected through open market purchases or privately negotiated transactions, including repurchase plans that satisfy the conditions of Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (Exchange Act).
Regulatory Capital
As a BHC, we are subject to regulatory capital rules, including Basel 3, issued by U.S. banking regulators. The Corporation's depository institution subsidiaries are also subject to the Prompt Corrective Action (PCA) framework. The Corporation and its primary affiliated banking entity, BANA, are Advanced approaches institutions under Basel 3 and are required to report regulatory risk-based capital ratios and RWA under both the Standardized and Advanced approaches. The lower of the capital ratios under Standardized or Advanced approaches compared to their respective regulatory capital ratio requirements is used to assess capital adequacy, including under the PCA framework. As of September 30, 2023, the CET1 capital, Tier 1 capital and Total capital ratios under the Standardized approach were the binding ratios.
Minimum Capital Requirements
In order to avoid restrictions on capital distributions and discretionary bonus payments, the Corporation must meet risk-based capital ratio requirements that include a capital conservation buffer of 2.5 percent (under the Advanced approaches only), an SCB (under the Standardized approach only), plus any applicable countercyclical capital buffer and a G-SIB surcharge. The buffers and surcharge must be comprised solely of CET1 capital. For the period from October 1, 2022 through September 30, 2023, the Corporation's minimum CET1 capital ratio requirements were 10.4 percent under the Standardized approach and 9.5 percent under the Advanced approaches. Effective October 1, 2023, our CET1 minimum requirement is 9.5 percent under both the Standardized and Advanced approaches.
The Corporation is required to calculate its G-SIB surcharge on an annual basis under two methods and is subject to the higher of the resulting two surcharges. Method 1 is consistent with the approach prescribed by the Basel Committee’s assessment methodology and is calculated using specified indicators of systemic importance. Method 2 modifies the Method 1 approach by, among other factors, including a measure of the Corporation’s reliance on short-term wholesale funding. The Corporation’s G-SIB surcharge, which is higher under Method 2, is expected to increase 50 bps on January 1, 2024, which would increase our minimum CET1 capital ratio requirement. At September 30, 2023, the Corporation’s CET1 capital ratio of 11.9 percent under the Standardized approach exceeded its current CET1 capital ratio requirement as well as the minimum requirement expected to be in place as of January 1, 2024 due to the anticipated increase in our G-SIB surcharge.
The Corporation is also required to maintain a minimum supplementary leverage ratio (SLR) of 3.0 percent plus a leverage buffer of 2.0 percent in order to avoid certain restrictions on capital distributions and discretionary bonus payments. Our insured depository institution subsidiaries are required to maintain a minimum 6.0 percent SLR to be considered well capitalized under the PCA framework.
Bank of America 22
Capital Composition and Ratios
Table 8 presents Bank of America Corporation’s capital ratios and related information in accordance with Basel 3 Standardized and Advanced approaches as measured at
September 30, 2023andDecember 31, 2022. For the periods presented herein, the Corporation met the definition of well capitalized under current regulatory requirements.
Table 8
Bank of America Corporation Regulatory Capital under Basel 3
Standardized Approach (1)
Advanced Approaches (1)
Regulatory Minimum (2)
(Dollars in millions, except as noted)
September 30, 2023
Risk-based capital metrics:
Common equity tier 1 capital
$
194,230
$
194,230
Tier 1 capital
222,623
222,623
Total capital (3)
251,137
241,712
Risk-weighted assets (in billions)
1,632
1,441
Common equity tier 1 capital ratio
11.9
%
13.5
%
10.4
%
Tier 1 capital ratio
13.6
15.4
11.9
Total capital ratio
15.4
16.8
13.9
Leverage-based metrics:
Adjusted quarterly average assets (in billions) (4)
$
3,051
$
3,051
Tier 1 leverage ratio
7.3
%
7.3
%
4.0
Supplementary leverage exposure (in billions)
$
3,597
Supplementary leverage ratio
6.2
%
5.0
December 31, 2022
Risk-based capital metrics:
Common equity tier 1 capital
$
180,060
$
180,060
Tier 1 capital
208,446
208,446
Total capital (3)
238,773
230,916
Risk-weighted assets (in billions)
1,605
1,411
Common equity tier 1 capital ratio
11.2
%
12.8
%
10.4
%
Tier 1 capital ratio
13.0
14.8
11.9
Total capital ratio
14.9
16.4
13.9
Leverage-based metrics:
Adjusted quarterly average assets (in billions) (4)
$
2,997
$
2,997
Tier 1 leverage ratio
7.0
%
7.0
%
4.0
Supplementary leverage exposure (in billions)
$
3,523
Supplementary leverage ratio
5.9
%
5.0
(1)Capital ratios as of September 30, 2023 and December 31, 2022 are calculated using the regulatory capital rule that allows a five-year transition period related to the adoption of the current expected credit losses (CECL) accounting standard on January 1, 2020.
(2)The CET1 capital regulatory minimum is the sum of the CET1 capital ratio minimum of 4.5 percent, our G-SIB surcharge of 2.5 percent and our capital conservation buffer of 2.5 percent (under the Advanced approaches) or the SCB of 3.4 percent (under the Standardized approach), as applicable, at both September 30, 2023 and December 31, 2022. The countercyclical capital buffer was zero for both periods. The SLR regulatory minimum includes a leverage buffer of 2.0 percent.
(3)Total capital under the Advanced approaches differs from the Standardized approach due to differences in the amount permitted in Tier 2 capital related to the qualifying allowance for credit losses.
(4)Reflects total average assets adjusted for certain Tier 1 capital deductions.
At September 30, 2023, CET1 capital was $194.2 billion, an increase of $14.2 billion from December 31, 2022, primarily due to earnings, partially offset by dividends and common stock repurchases. Tier 1 capital increased $14.2 billion primarily driven by the same factors as CET1 capital. Total capital under the Standardized approach increased $12.4 billion primarily due to the same factors driving the increase in Tier 1 capital and an increase in the adjusted allowance for credit losses included in Tier 2 capital, partially offset by a decrease in subordinated
debt. RWA under the Standardized approach, which yielded the lower CET1 capital ratio at September 30, 2023, increased $27.5 billion during the nine months ended September 30, 2023 to $1,632 billion primarily due to higher counterparty exposures in Global Markets and loan growth. Supplementary leverage exposure at September 30, 2023 increased $73.9 billion primarily due to higher cash held at central banks, partially offset by lower debt securities balances.
23Bank of America
Table 9 shows the capital composition at September 30, 2023 and December 31, 2022.
Table 9
Capital Composition under Basel 3
(Dollars in millions)
September 30 2023
December 31 2022
Total common shareholders’ equity
$
258,667
$
244,800
CECL transitional amount (1)
1,254
1,881
Goodwill, net of related deferred tax liabilities
(68,644)
(68,644)
Deferred tax assets arising from net operating loss and tax credit carryforwards
(7,778)
(7,776)
Intangibles, other than mortgage servicing rights, net of related deferred tax liabilities
(1,508)
(1,554)
Defined benefit pension plan net assets
(911)
(867)
Cumulative unrealized net (gain) loss related to changes in fair value of financial liabilities attributable to own creditworthiness, net-of-tax
967
496
Accumulated net (gain) loss on certain cash flow hedges (2)
12,251
11,925
Other
(68)
(201)
Common equity tier 1 capital
194,230
180,060
Qualifying preferred stock, net of issuance cost
28,396
28,396
Other
(3)
(10)
Tier 1 capital
222,623
208,446
Tier 2 capital instruments
15,981
18,751
Qualifying allowance for credit losses (3)
13,007
11,739
Other
(474)
(163)
Total capital under the Standardized approach
251,137
238,773
Adjustment in qualifying allowance for credit losses under the Advanced approaches (3)
(9,425)
(7,857)
Total capital under the Advanced approaches
$
241,712
$
230,916
(1)September 30, 2023 and December 31, 2022 include 50 percent and 75 percent of the CECL transition provision’s impact as of December 31, 2021.
(2)Includes amounts in accumulated other comprehensive income (OCI) related to the hedging of items that are not recognized at fair value on the Consolidated Balance Sheet.
(3)Includes the impact of transition provisions related to the CECL accounting standard.
Table 10 shows the components of RWA as measured under Basel 3 at September 30, 2023 and December 31, 2022.
Table 10
Risk-weighted Assets under Basel 3
Standardized Approach
Advanced Approaches
Standardized Approach
Advanced Approaches
(Dollars in billions)
September 30, 2023
December 31, 2022
Credit risk
$
1,564
$
966
$
1,538
$
939
Market risk
68
67
67
67
Operational risk
n/a
364
n/a
364
Risks related to credit valuation adjustments
n/a
44
n/a
41
Total risk-weighted assets
$
1,632
$
1,441
$
1,605
$
1,411
n/a = not applicable
Bank of America, N.A. Regulatory Capital
Table 11 presents regulatory capital information for BANA in accordance with Basel 3 Standardized and Advanced approaches as measured at September 30, 2023 and December 31, 2022. BANA met the definition of well capitalized under the PCA framework for both periods.
Bank of America 24
Table 11
Bank of America, N.A. Regulatory Capital under Basel 3
Standardized Approach (1)
Advanced Approaches (1)
Regulatory Minimum (2)
(Dollars in millions, except as noted)
September 30, 2023
Risk-based capital metrics:
Common equity tier 1 capital
$
184,779
$
184,779
Tier 1 capital
184,779
184,779
Total capital (3)
199,115
189,897
Risk-weighted assets (in billions)
1,387
1,105
Common equity tier 1 capital ratio
13.3
%
16.7
%
7.0
%
Tier 1 capital ratio
13.3
16.7
8.5
Total capital ratio
14.4
17.2
10.5
Leverage-based metrics:
Adjusted quarterly average assets (in billions) (4)
$
2,390
$
2,390
Tier 1 leverage ratio
7.7
%
7.7
%
5.0
Supplementary leverage exposure (in billions)
$
2,831
Supplementary leverage ratio
6.5
%
6.0
December 31, 2022
Risk-based capital metrics:
Common equity tier 1 capital
$
181,089
$
181,089
Tier 1 capital
181,089
181,089
Total capital (3)
194,254
186,648
Risk-weighted assets (in billions)
1,386
1,087
Common equity tier 1 capital ratio
13.1
%
16.7
%
7.0
%
Tier 1 capital ratio
13.1
16.7
8.5
Total capital ratio
14.0
17.2
10.5
Leverage-based metrics:
Adjusted quarterly average assets (in billions) (4)
$
2,358
$
2,358
Tier 1 leverage ratio
7.7
%
7.7
%
5.0
Supplementary leverage exposure (in billions)
$
2,785
Supplementary leverage ratio
6.5
%
6.0
(1)Capital ratios as of September 30, 2023 and December 31, 2022 are calculated using the regulatory capital rule that allows a five-year transition period related to the adoption of the CECL accounting standard on January 1, 2020.
(2)Risk-based capital regulatory minimums at both September 30, 2023 and December 31, 2022 are the minimum ratios under Basel 3 including a capital conservation buffer of 2.5 percent. The regulatory minimums for the leverage ratios as of both period ends are the percent required to be considered well capitalized under the PCA framework.
(3)Total capital under the Advanced approaches differs from the Standardized approach due to differences in the amount permitted in Tier 2 capital related to the qualifying allowance for credit losses.
(4)Reflects total average assets adjusted for certain Tier 1 capital deductions.
Total Loss-Absorbing Capacity Requirements
TLAC consists of the Corporation’s Tier 1 capital and eligible long-term debt issued directly by the Corporation. Eligible long-term debt for TLAC ratios is comprised of unsecured debt that has a remaining maturity of at least one year and satisfies additional requirements as prescribed in the TLAC final rule. As with the risk-based capital ratios and SLR, the Corporation is
required to maintain TLAC ratios in excess of minimum requirements plus applicable buffers to avoid restrictions on capital distributions and discretionary bonus payments. Table 12 presents the Corporation's TLAC and long-term debt ratios and related information as of September 30, 2023 and December 31, 2022.
25Bank of America
Table 12
Bank of America Corporation Total Loss-Absorbing Capacity and Long-Term Debt
TLAC (1)
Regulatory Minimum (2)
Long-term Debt
Regulatory Minimum (3)
(Dollars in millions)
September 30, 2023
Total eligible balance
$
478,360
$
241,717
Percentage of risk-weighted assets (4)
29.3
%
22.0
%
14.8
%
8.5
%
Percentage of supplementary leverage exposure
13.3
9.5
6.7
4.5
December 31, 2022
Total eligible balance
$
465,451
$
243,833
Percentage of risk-weighted assets (4)
29.0
%
22.0
%
15.2
%
8.5
%
Percentage of supplementary leverage exposure
13.2
9.5
6.9
4.5
(1)As of September 30, 2023 and December 31, 2022, TLAC ratios are calculated using the regulatory capital rule that allows a five-year transition period related to the adoption of the CECL accounting standard on January 1, 2020.
(2)The TLAC RWA regulatory minimum consists of 18.0 percent plus a TLAC RWA buffer comprised of 2.5 percent plus the Method 1 G-SIB surcharge of 1.5 percent. The countercyclical buffer is zero for both periods. The TLAC supplementary leverage exposure regulatory minimum consists of 7.5 percent plus a 2.0 percent TLAC leverage buffer. The TLAC RWA and leverage buffers must be comprised solely of CET1 capital and Tier 1 capital, respectively.
(3)The long-term debt RWA regulatory minimum is comprised of 6.0 percent plus an additional 2.5 percent requirement based on the Corporation’s Method 2 G-SIB surcharge. The long-term debt leverage exposure regulatory minimum is 4.5 percent.
(4)The approach that yields the higher RWA is used to calculate TLAC and long-term debt ratios, which was the Standardized approach as of September 30, 2023 and December 31, 2022.
RegulatoryDevelopments
On July 27, 2023, U.S. banking regulators issued proposed rules that would update future U.S. regulatory capital requirements. Under the capital proposal, the Advanced approaches would be replaced with a new standardized approach, referred to as the expanded risk-based approach, which would be phased in over a three-year period beginning July 1, 2025. U.S. banking regulators also issued proposed rules to revise the risk-based capital surcharge for G-SIBs, which would be effective two calendar quarters after finalization. On August 29, 2023, U.S. banking regulators issued proposed rules that would change the criteria for debt instruments included in the Corporation’s eligible long-term debt and TLAC. Any final rules issued are subject to change from the current proposals. The Corporation is evaluating the potential impact of the proposed rules on its regulatory capital, eligible long-term debt and TLAC requirements.
Regulatory Capital and Securities Regulation
The Corporation’s principal U.S. broker-dealer subsidiaries are BofA Securities, Inc. (BofAS) and Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S). On August 13, 2023, Merrill Lynch Professional Clearing Corp. (MLPCC) merged into its immediate parent, BofAS. Prior to that date, MLPCC was a fully-guaranteed subsidiary of BofAS and provided clearing and settlement services as well as prime brokerage and arranged financing services for institutional clients. Following the merger, client services previously provided by MLPCC are now being provided by or through BofAS.
The Corporation's principal European broker-dealer subsidiaries are Merrill Lynch International (MLI) and BofA Securities Europe SA (BofASE).
The U.S. broker-dealer subsidiaries are subject to the net capital requirements of Rule 15c3-1 under the Exchange Act. BofAS computes its minimum capital requirements as an alternative net capital broker-dealer under Rule 15c3-1e, and MLPF&S computes its minimum capital requirements in accordance with the alternative standard under Rule 15c3-1. BofAS is registered as a futures commission merchant and is subject to Commodity Futures Trading Commission (CFTC) Regulation 1.17. The U.S. broker-dealer subsidiaries are also registered with the Financial Industry Regulatory Authority, Inc. (FINRA). Pursuant to FINRA Rule 4110, FINRA may impose higher net capital requirements than Rule 15c3-1 under the Exchange Act with respect to each of the broker-dealers.
BofAS provides institutional services, and in accordance with the alternative net capital requirements, is required to maintain tentative net capital in excess of $5.0 billion and net capital in excess of the greater of $1.0 billion or a certain percentage of its reserve requirement in addition to a certain percentage of securities-based swap risk margin. BofAS must also notify the SEC in the event its tentative net capital is less than $6.0 billion. BofAS is also required to hold a certain percentage of its customers' and affiliates' risk-based margin in order to meet its CFTC minimum net capital requirement. At September 30, 2023, BofAS had tentative net capital of $25.1 billion. BofAS also had regulatory net capital of $23.0 billion, which exceeded the minimum requirement of $4.3 billion.
MLPF&S provides retail services. At September 30, 2023, MLPF&S' regulatory net capital was $6.2 billion, which exceeded the minimum requirement of $136 million.
Our European broker-dealers are subject to requirements from U.S. and non-U.S. regulators. MLI, a U.K. investment firm, is regulated by the Prudential Regulation Authority and the Financial Conduct Authority and is subject to certain regulatory capital requirements. At September 30, 2023, MLI’s capital resources were $33.7 billion, which exceeded the minimum Pillar 1 requirement of $10.8 billion.
BofASE, an authorized credit institution with its head office located in France, is regulated by the Autorité de Contrôle Prudentiel et de Résolution and the Autorité des Marchés Financiers, and supervised under the Single Supervisory Mechanism by the European Central Bank. At September 30, 2023, BofASE's capital resources were $9.2 billion, which exceeded the minimum Pillar 1 requirement of $3.5 billion.
In addition, MLI and BofASE became conditionally registered with the SEC as security-based swap dealers in the fourth quarter of 2021, and maintained net liquid assets at September 30, 2023 that exceeded the applicable minimum requirements under the Exchange Act.
Liquidity Risk
Funding and Liquidity Risk Management
Our primary liquidity risk management objective is to meet expected or unexpected cash flow and collateral requirements, including payments under long-term debt agreements, commitments to extend credit and customer deposit withdrawals, while continuing to support our businesses and customers under a range of economic conditions. To achieve
Bank of America 26
that objective, we analyze and monitor our liquidity risk under expected and stressed conditions, maintain liquidity and access to diverse funding sources, including our stable deposit base, and seek to align liquidity-related incentives and risks. These liquidity risk management practices have allowed us to effectively manage the market stress from increased volatility due to the failure of certain financial institutions in the first half of 2023. Our practices have also allowed us to effectively manage market fluctuations from the rising interest rate environment, inflationary pressures and changes in the macroeconomic environment.
We define liquidity as readily available assets, limited to cash and high-quality, liquid, unencumbered securities that we can use to meet our contractual and contingent financial obligations as they arise. We manage our liquidity position through line-of-business and ALM activities, as well as through our legal entity funding strategy, on both a forward and current (including intraday) basis under both expected and stressed conditions. We believe that a centralized approach to funding and liquidity management enhances our ability to monitor liquidity requirements, maximizes access to funding sources, minimizes borrowing costs and facilitates timely responses to liquidity events. For more information on the Corporation’s liquidity risks, see the Liquidity section within Item 1A. Risk Factors of the Corporation’s 2022 Annual Report on Form 10-K. For more information regarding global funding and liquidity risk management, as well as liquidity sources, liquidity arrangements, contingency planning and credit ratings discussed below, see Liquidity Risk in the MD&A of the Corporation’s 2022 Annual Report on Form 10-K.
NB Holdings Corporation
Bank of America Corporation, as the parent company (the Parent), which is a separate and distinct legal entity from our bank and nonbank subsidiaries, has an intercompany arrangement with our wholly-owned holding company subsidiary, NB Holdings Corporation (NB Holdings). We have transferred, and agreed to transfer, additional Parent assets not required to satisfy anticipated near-term expenditures to NB Holdings. The Parent is expected to continue to have access to the same flow of dividends, interest and other amounts of cash necessary to service its debt, pay dividends and perform other obligations as it would have had it not entered into these arrangements and transferred any assets. These arrangements support our preferred single point of entry resolution strategy, under which only the Parent would be resolved under the U.S. Bankruptcy Code.
Global Liquidity Sources and Other Unencumbered Assets
We maintain liquidity available to the Corporation, including the Parent and selected subsidiaries, in the form of cash and high-quality, liquid, unencumbered securities. Our liquidity buffer, referred to as Global Liquidity Sources (GLS), is comprised of assets that are readily available to the Parent and selected subsidiaries, including holding company, bank and broker-dealer subsidiaries, even during stressed market conditions. Our cash
is primarily on deposit with the Federal Reserve Bank and, to a lesser extent, central banks outside of the U.S. We limit the composition of high-quality, liquid, unencumbered securities to U.S. government securities, U.S. agency securities, U.S. agency mortgage-backed securities and other investment-grade securities, and a select group of non-U.S. government securities. We can obtain cash for these securities, even in stressed conditions, through repurchase agreements or outright sales. We hold our GLS in legal entities that allow us to meet the liquidity requirements of our global businesses, and we consider the impact of potential regulatory, tax, legal and other restrictions that could limit the transferability of funds among entities.
Table 13 presents average GLS for the three months ended September 30, 2023 and December 31, 2022.
Table 13
Average Global Liquidity Sources
Three Months Ended
(Dollars in billions)
September 30 2023
December 31 2022
Bank entities
$
693
$
694
Nonbank and other entities (1)
166
174
Total Average Global Liquidity Sources
$
859
$
868
(1) Nonbank includes Parent, NB Holdings and other regulated entities.
Our bank subsidiaries’ liquidity is primarily driven by deposit and lending activity, as well as securities valuation and net debt activity. Bank subsidiaries can also generate incremental liquidity by pledging a range of unencumbered loans and securities to certain Federal Home Loan Banks (FHLBs) and the Federal Reserve Discount Window. The cash we could have obtained by borrowing against this pool of specifically-identified eligible assets was $327 billion and $348 billion at September 30, 2023 and December 31, 2022. We have established operational procedures to enable us to borrow against these assets, including regularly monitoring our total pool of eligible loans and securities collateral. Eligibility is defined in guidelines from the FHLBs and the Federal Reserve and is subject to change at their discretion. Due to regulatory restrictions, liquidity generated by the bank subsidiaries can generally be used only to fund obligations within the bank subsidiaries, and transfers to the Parent or nonbank subsidiaries may be subject to prior regulatory approval.
Liquidity is also held in nonbank entities, including the Parent, NB Holdings and other regulated entities. The Parent and NB Holdings liquidity is typically in the form of cash deposited at BANA, which is excluded from the liquidity at bank subsidiaries, and high-quality, liquid, unencumbered securities. Liquidity held in other regulated entities, comprised primarily of broker-dealer subsidiaries, is primarily available to meet the obligations of that entity, and transfers to the Parent or to any other subsidiary may be subject to prior regulatory approval due to regulatory restrictions and minimum requirements. Our other regulated entities also hold unencumbered investment-grade securities and equities that we believe could be used to generate additional liquidity.
27Bank of America
Table 14 presents the composition of average GLS for the three months ended September 30, 2023 and December 31, 2022.
Table 14
Average Global Liquidity Sources Composition
Three Months Ended
(Dollars in billions)
September 30 2023
December 31 2022
Cash on deposit
$
350
$
174
U.S. Treasury securities
136
252
U.S. agency securities, mortgage-backed securities, and other investment-grade securities
357
427
Non-U.S. government securities
16
15
Total Average Global Liquidity Sources
$
859
$
868
Our GLS are substantially the same in composition to what qualifies as High Quality Liquid Assets (HQLA) under the final U.S. Liquidity Coverage Ratio (LCR) rules. However, HQLA for purposes of calculating LCR is not reported at market value, but at a lower value that incorporates regulatory deductions and the exclusion of excess liquidity held at certain subsidiaries. The LCR is calculated as the amount of a financial institution’s unencumbered HQLA relative to the estimated net cash outflows the institution could encounter over a 30-day period of significant liquidity stress, expressed as a percentage. Our average consolidated HQLA, on a net basis, was $582 billion and $605 billion for the three months ended September 30, 2023 and December 31, 2022. For the same periods, the average consolidated LCR was 116 percent and 120 percent. Our LCR fluctuates due to normal business flows from customer activity.
Liquidity Stress Analysis
We utilize liquidity stress analysis to assist us in determining the appropriate amounts of liquidity to maintain at the Parent and our subsidiaries to meet contractual and contingent cash outflows under a range of scenarios. For more information on liquidity stress analysis, see Liquidity Risk – Liquidity Stress Analysis in the MD&A of the Corporation’s 2022 Annual Report on Form 10-K.
Net Stable Funding Ratio
The Net Stable Funding Ratio (NSFR) is a liquidity requirement for large banks to maintain a minimum level of stable funding over a one-year period. The requirement is intended to support the ability of banks to lend to households and businesses in both normal and adverse economic conditions and is complementary to the LCR, which focuses on short-term liquidity risks. The U.S. NSFR applies to the Corporation on a
consolidated basis and to our insured depository institutions. At September 30, 2023, the Corporation and its insured depository institutions were in compliance with the U.S. NSFR.
Diversified Funding Sources
We fund our assets primarily with a mix of deposits, and secured and unsecured liabilities through a centralized, globally coordinated funding approach diversified across products, programs, markets, currencies and investor groups. We fund a substantial portion of our lending activities through our deposits, which were $1.88 trillion and $1.93 trillion at September 30, 2023 and December 31, 2022. Our trading activities in other regulated entities are primarily funded on a secured basis through securities lending and repurchase agreements, and these amounts will vary based on customer activity and market conditions.
Deposits
Our deposit base is well-diversified by clients, geography and product type across our business segments. At September 30, 2023, 52 percent of our deposits were in Consumer Banking, 15 percent in GWIM and 26 percent in Global Banking. We consider a substantial portion of our deposit base to be a stable, low-cost and consistent source of liquidity. At September 30, 2023, approximately 67 percent of consumer and small business deposits and 79 percent of U.S. deposits in Global Banking were held by clients who have had accounts with us for 10 or more years. In addition, at September 30, 2023 and December 31, 2022, 30 percent and 34 percent of our deposits were noninterest-bearing and included operating accounts of our consumer and commercial clients. Deposits at September 30, 2023 decreased $45.7 billion, or two percent, from December 31, 2022 primarily due to an increase in customer spending and debt payments, customers’ movement of balances to higher yielding investment alternatives and seasonal outflows.
Long-term Debt
During the nine months ended September 30, 2023, we issued $54.0 billion of long-term debt consisting of $23.0 billion of notes issued by Bank of America Corporation, substantially all of which were TLAC compliant, $18.7 billion of notes issued by Bank of America, N.A. and $12.3 billion of other debt.
During the nine months ended September 30, 2023, we had total long-term debt maturities and redemptions in the aggregate of $33.0 billion consisting of $22.5 billion for Bank of America Corporation, $4.6 billion for Bank of America, N.A. and $5.9 billion of other debt. Table 15 presents the carrying value of aggregate annual contractual maturities of long-term debt at September 30, 2023.
Bank of America 28
Table 15
Long-term Debt by Maturity
(Dollars in millions)
Remainder of 2023
2024
2025
2026
2027
Thereafter
Total
Bank of America Corporation
Senior notes (1)
$
—
$
10,018
$
24,938
$
24,026
$
20,847
$
121,225
$
201,054
Senior structured notes
281
695
677
1,116
614
9,437
12,820
Subordinated notes
—
3,141
5,089
4,831
2,108
9,938
25,107
Junior subordinated notes
—
—
—
—
200
557
757
Total Bank of America Corporation
281
13,854
30,704
29,973
23,769
141,157
239,738
Bank of America, N.A.
Senior notes
—
5,470
2,393
2,586
—
—
10,449
Subordinated notes
—
—
—
21
—
1,397
1,418
Advances from Federal Home Loan Banks
100
4,750
13
9
4
51
4,927
Securitizations and other Bank VIEs (2)
1,000
1,000
2,244
1,423
—
552
6,219
Other
32
532
152
35
42
4
797
Total Bank of America, N.A.
1,132
11,752
4,802
4,074
46
2,004
23,810
Other debt
Structured Liabilities
1,857
5,390
2,468
3,582
1,932
11,211
26,440
Nonbank VIEs (2)
—
5
24
7
—
335
371
Total other debt
1,857
5,395
2,492
3,589
1,932
11,546
26,811
Total long-term debt
$
3,270
$
31,001
$
37,998
$
37,636
$
25,747
$
154,707
$
290,359
(1)Total includes $181.2 billion of outstanding notes that are both TLAC eligible and callable one year before their stated maturities, including $2.5 billion during the remainder of 2023, and $21.6 billion, $21.4 billion, $20.8 billion and $24.0 billion during each year of 2024 through 2027, respectively, and $90.8 billion thereafter. For more information on our TLAC eligible and callable outstanding notes, see Liquidity Risk – Diversified Funding Sources in the MD&A of the Corporation’s 2022 Annual Report on Form 10-K.
(2)Represents liabilities of consolidated variable interest entities (VIEs) included in total long-term debt on the Consolidated Balance Sheet.
Total long-term debt increased $14.4 billion to $290.4 billion during the nine months ended September 30, 2023 primarily due to debt issuances, partially offset by debt maturities, redemptions, repurchases and valuation adjustments. We may, from time to time, purchase outstanding debt instruments in various transactions, depending on market conditions, liquidity and other factors. Our other regulated entities may also make markets in our debt instruments to provide liquidity for investors.
During the nine months ended September 30, 2023, we issued $11.3 billion of structured notes, which are debt obligations that pay investors returns linked to other debt or equity securities, indices, currencies or commodities. These structured notes are typically issued to meet client demand, and notes with certain attributes may also be TLAC eligible. We typically hedge the returns we are obligated to pay on these liabilities with derivatives and/or investments in the underlying instruments, so that from a funding perspective, the cost is similar to our other unsecured long-term debt. We could be required to settle certain structured note obligations for cash or other securities prior to maturity under certain circumstances, which we consider for liquidity planning purposes. We believe, however, that a portion of such borrowings will remain outstanding beyond the earliest put or redemption date.
Substantially all of our senior and subordinated debt obligations contain no provisions that could trigger a requirement for an early repayment, require additional collateral support, result in changes to terms, accelerate maturity or create additional financial obligations upon an adverse change in our credit ratings, financial ratios, earnings, cash flows or stock price. For more information on long-term debt funding, including issuances and maturities and redemptions, see Note
11 – Long-term Debt to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K.
We use derivative transactions to manage the duration, interest rate and currency risks of our borrowings, considering the characteristics of the assets they are funding. For more information on our ALM activities, see Interest Rate Risk Management for the Banking Book on page 46.
Credit Ratings
Credit ratings and outlooks are opinions expressed by rating agencies on our creditworthiness and that of our obligations or securities, including long-term debt, short-term borrowings, preferred stock and other securities, including asset securitizations. Table 16 presents the Corporation’s current long-term/short-term senior debt ratings and outlooks expressed by the rating agencies.
The ratings and outlooks from Fitch Ratings for the Corporation and its subsidiaries have not changed from those disclosed in the Corporation's 2022 Annual Report on Form 10-K. The ratings and outlooks from Moody’s Investors Service (Moody’s) and Standard and Poor’s Global Ratings (S&P) for the Corporation and its subsidiaries have not changed from those disclosed in the Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2023.
For more information on additional collateral and termination payments that could be required in connection with certain over-the-counter derivative contracts and other trading agreements in the event of a credit rating downgrade, see Note 3 – Derivatives to the Consolidated Financial Statements herein and Item 1A. Risk Factors of the Corporation’s 2022 Annual Report on Form 10-K.
29Bank of America
Table 16
Senior Debt Ratings
Moody’s Investors Service
Standard & Poor’s Global Ratings
Fitch Ratings
Long-term
Short-term
Outlook
Long-term
Short-term
Outlook
Long-term
Short-term
Outlook
Bank of America Corporation
A1
P-1
Stable
A-
A-2
Stable
AA-
F1+
Stable
Bank of America, N.A.
Aa1
P-1
Stable
A+
A-1
Stable
AA
F1+
Stable
Bank of America Europe Designated Activity Company
NR
NR
NR
A+
A-1
Stable
AA
F1+
Stable
Merrill Lynch, Pierce, Fenner & Smith Incorporated
NR
NR
NR
A+
A-1
Stable
AA
F1+
Stable
BofA Securities, Inc.
NR
NR
NR
A+
A-1
Stable
AA
F1+
Stable
Merrill Lynch International
NR
NR
NR
A+
A-1
Stable
AA
F1+
Stable
BofA Securities Europe SA
NR
NR
NR
A+
A-1
Stable
AA
F1+
Stable
NR = not rated
Finance Subsidiary Issuers and Parent Guarantor
BofA Finance LLC, a Delaware limited liability company (BofA Finance), is a consolidated finance subsidiary of the Corporation that has issued and sold, and is expected to continue to issue and sell, its senior unsecured debt securities (Guaranteed Notes) that are fully and unconditionally guaranteed by the Corporation. The Corporation guarantees the due and punctual payment, on demand, of amounts payable on the Guaranteed Notes if not paid by BofA Finance. In addition, each of BAC Capital Trust XIII, BAC Capital Trust XIV and BAC Capital Trust XV, Delaware statutory trusts (collectively, the Trusts) is a 100 percent owned finance subsidiary of the Corporation that has issued and sold trust preferred securities (the Trust Preferred Securities) or capital securities (the Capital Securities and, together with the Guaranteed Notes and the Trust Preferred Securities, the Guaranteed Securities), as applicable, that remained outstanding at September 30, 2023. The Corporation has fully and unconditionally guaranteed (or effectively provided for the full and unconditional guarantee of) all such securities issued by such finance subsidiaries. For more information regarding such guarantees by the Corporation, see Liquidity Risk – Finance Subsidiary Issuers and Parent Guarantor in the MD&A of the Corporation’s 2022 Annual Report on Form 10-K.
Representations and Warranties Obligations
For information on representations and warranties obligations in connection with the sale of mortgage loans, see Note 12 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K.
Credit Risk Management
For information on our credit risk management activities, see the following: Consumer Portfolio Credit Risk Management on page 30, Commercial Portfolio Credit Risk Management on page 35, Non-U.S. Portfolio on page 41, Allowance for Credit Losses on page 42, and Note 5 – Outstanding Loans and Leases and Allowance for Credit Losses to the Consolidated Financial Statements. For information on the Corporation’s loan modification programs, see Note 1 – Summary of Significant Accounting Principles and Note 5 – Outstanding Loans and Leases and Allowance for Credit Losses to the Consolidated Financial Statements. For more information on the Corporation’s credit risks, see the Credit section within Item 1A. Risk Factors of the Corporation’s 2022 Annual Report on Form 10-K.
During the nine months ended September 30, 2023, our asset quality remained relatively healthy. Our net charge-off ratio increased primarily driven by credit card loans, as delinquency trends continue to slowly increase off of historic lows; however,
they remain below the same period in 2019. Nonperforming loans increased modestly compared to December 31, 2022 driven by the commercial real estate office property type, while commercial reservable criticized exposure increased driven by both office as well as other industries that have been impacted by the current environment. Uncertainty remains regarding broader economic impacts as a result of inflationary pressures, rising rates and the current geopolitical environment and could lead to adverse impacts to credit quality metrics in future periods.
Consumer Portfolio Credit Risk Management
Credit risk management for the consumer portfolio begins with initial underwriting and continues throughout a borrower’s credit cycle. Statistical techniques in conjunction with experiential judgment are used in all aspects of portfolio management including underwriting, product pricing, risk appetite, setting credit limits, and establishing operating processes and metrics to quantify and balance risks and returns. Statistical models are built using detailed behavioral information from external sources, such as credit bureaus, and/or internal historical experience and are a component of our consumer credit risk management process. These models are used in part to assist in making both new and ongoing credit decisions as well as portfolio management strategies, including authorizations and line management, collection practices and strategies, and determination of the allowance for loan and lease losses and allocated capital for credit risk.
Consumer Credit Portfolio
During the nine months ended September 30, 2023, the U.S. unemployment rate remained relatively stable and home prices have increased slightly in recent months. During the three and nine months ended September 30, 2023, net charge-offs increased $345 million and $853 million to $804 million and $2.2 billion compared to the same periods in 2022 primarily due to late-stage delinquent credit card loans that were charged off.
The consumer allowance for loan and lease losses increased $930 million during the nine months ended September 30, 2023 to $8.2 billion. For more information, see Allowance for Credit Losses on page 42.
For more information on our accounting policies regarding delinquencies, nonperforming status, charge-offs and loan modifications for the consumer portfolio, see Note 1 – Summary of Significant Accounting Principlesto the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-Kand Note 5 – Outstanding Loans and Leases and Allowance for Credit Losses to the Consolidated Financial Statements.
Bank of America 30
Table 17 presents our outstanding consumer loans and leases, consumer nonperforming loans and accruing consumer loans past due 90 days or more.
Table 17
Consumer Credit Quality
Outstandings
Nonperforming
Accruing Past Due 90 Days or More
(Dollars in millions)
September 30 2023
December 31 2022
September 30 2023
December 31 2022
September 30 2023
December 31 2022
Residential mortgage (1)
$
229,166
$
229,670
$
2,185
$
2,167
$
265
$
368
Home equity
25,492
26,563
479
510
—
—
Credit card
99,687
93,421
n/a
n/a
1,016
717
Direct/Indirect consumer (2)
104,059
106,236
128
77
1
2
Other consumer
122
156
—
—
—
—
Consumer loans excluding loans accounted for under the fair value option
$
458,526
$
456,046
$
2,792
$
2,754
$
1,282
$
1,087
Loans accounted for under the fair value option (3)
253
339
Total consumer loans and leases
$
458,779
$
456,385
Percentage of outstanding consumer loans and leases (4)
n/a
n/a
0.61
%
0.60
%
0.28
%
0.24
%
Percentage of outstanding consumer loans and leases, excluding fully-insured loan portfolios (4)
n/a
n/a
0.62
0.62
0.23
0.16
(1)Residential mortgage loans accruing past due 90 days or more are fully-insured loans. At September 30, 2023 and December 31, 2022, residential mortgage included $180 million and $260 million of loans on which interest had been curtailed by the Federal Housing Administration (FHA), and therefore were no longer accruing interest, although principal was still insured, and $85 million and $108 million of loans on which interest was still accruing.
(2)Outstandings primarily includes auto and specialty lending loans and leases of $54.0 billion and $51.8 billion, U.S. securities-based lending loans of $46.5 billion and $50.4 billion at September 30, 2023 and December 31, 2022, and non-U.S. consumer loans of $2.8 billion and $3.0 billion at September 30, 2023 and December 31, 2022.
(3)For more information on the fair value option, see Note 15 – Fair Value Option to the Consolidated Financial Statements.
(4)Excludes consumer loans accounted for under the fair value option. At September 30, 2023 and December 31, 2022, $4 million and $7 million of loans accounted for under the fair value option were past due 90 days or more and not accruing interest.
n/a = not applicable
Table 18 presents net charge-offs and related ratios for consumer loans and leases.
Table 18
Consumer Net Charge-offs and Related Ratios
Net Charge-offs
Net Charge-off Ratios (1)
Three Months Ended September 30
Nine Months Ended September 30
Three Months Ended September 30
Nine Months Ended September 30
(Dollars in millions)
2023
2022
2023
2022
2023
2022
2023
2022
Residential mortgage
$
2
$
(3)
$
5
$
73
—
%
(0.01)
%
—
%
0.04
%
Home equity
(14)
(18)
(42)
(72)
(0.22)
(0.25)
(0.22)
(0.35)
Credit card
673
328
1,784
948
2.72
1.53
2.52
1.55
Direct/Indirect consumer
25
9
43
17
0.10
0.03
0.05
0.02
Other consumer
118
143
387
358
n/m
n/m
n/m
n/m
Total
$
804
$
459
$
2,177
$
1,324
0.70
0.41
0.64
0.40
(1)Net charge-off ratios are calculated as annualized net charge-offs divided by average outstanding loans and leases, excluding loans accounted for under the fair value option.
n/m = not meaningful
We believe that the presentation of information adjusted to exclude the impact of the fully-insured loan portfolio and loans accounted for under the fair value option is more representative of the ongoing operations and credit quality of the business. As a result, in the following tables and discussions of the residential mortgage and home equity portfolios, we exclude loans accounted for under the fair value option and provide information that excludes the impact of the fully-insured loan portfolio in certain credit quality statistics.
Residential Mortgage
The residential mortgage portfolio made up the largest percentage of our consumer loan portfolio at 50 percent of consumer loans and leases at September 30, 2023. Approximately 51 percent of the residential mortgage portfolio
was in Consumer Banking, 46 percent was in GWIM and the remaining portion was in All Other.
Outstanding balances in the residential mortgage portfolio decreased $504 million during the nine months ended September 30, 2023, as paydowns outpaced new originations.
At September 30, 2023 and December 31, 2022, the residential mortgage portfolio included $11.0 billion and $11.7 billion of outstanding fully-insured loans, of which $2.1 billion and $2.2 billion had FHA insurance, with the remainder protected by Fannie Mae long-term standby agreements.
Table 19 presents certain residential mortgage key credit statistics on both a reported basis and excluding the fully-insured loan portfolio. The following discussion presents the residential mortgage portfolio excluding the fully-insured loan portfolio.
31Bank of America
Table 19
Residential Mortgage – Key Credit Statistics
Reported Basis (1)
Excluding Fully-insured Loans (1)
(Dollars in millions)
September 30 2023
December 31 2022
September 30 2023
December 31 2022
Outstandings
$
229,166
$
229,670
$
218,124
$
217,976
Accruing past due 30 days or more
1,447
1,471
925
844
Accruing past due 90 days or more
265
368
—
—
Nonperforming loans (2)
2,185
2,167
2,185
2,167
Percent of portfolio
Refreshed LTV greater than 90 but less than or equal to 100
1
%
1
%
1
%
1
%
Refreshed LTV greater than 100
—
—
—
—
Refreshed FICO below 620
1
1
1
1
(1)Outstandings, accruing past due, nonperforming loans and percentages of portfolio exclude loans accounted for under the fair value option.
(2)Includes loans that are contractually current that have not yet demonstrated a sustained period of payment performance following a modification.
Nonperforming outstanding balances in the residential mortgage portfolio of $2.2 billion remained relatively unchanged during the nine months ended September 30, 2023. Of the nonperforming residential mortgage loans at September 30, 2023, $1.3 billion, or 61 percent, were current on contractual payments. Loans accruing past due 30 days or more increased $81 million.
Of the $218.1 billion in total residential mortgage loans outstanding at September 30, 2023, $62.8 billion, or 29 percent, of loans were originated as interest-only. The outstanding balance of interest-only residential mortgage loans that had entered the amortization period was $3.5 billion, or six percent, at September 30, 2023. Residential mortgage loans that have entered the amortization period generally experience a higher rate of early stage delinquencies and nonperforming status compared to the residential mortgage portfolio as a whole. At September 30, 2023, $66 million, or two percent, of outstanding interest-only residential mortgages that had entered the amortization period were accruing past due 30 days or more compared to $925 million, or less than one percent, for the
entire residential mortgage portfolio. In addition, at September 30, 2023, $199 million, or six percent, of outstanding interest-only residential mortgage loans that had entered the amortization period were nonperforming, of which $63 million were contractually current. Loans that have yet to enter the amortization period in our interest-only residential mortgage portfolio are primarily well-collateralized loans to our wealth management clients and have an interest-only period of 3 to 10 years. Substantially all of these loans that have yet to enter the amortization period will not be required to make a fully-amortizing payment until 2025 or later.
Table 20 presents outstandings, nonperforming loans and net charge-offs by certain state concentrations for the residential mortgage portfolio. The Los Angeles-Long Beach-Santa Ana Metropolitan Statistical Area (MSA) within California represented 14 percent of outstandings at both September 30, 2023 and December 31, 2022. In the New York area, the New York-Northern New Jersey-Long Island MSA made up 15 percent of outstandings at both September 30, 2023 and December 31, 2022.
Table 20
Residential Mortgage State Concentrations
Outstandings (1)
Nonperforming (1)
Net Charge-offs
September 30 2023
December 31 2022
September 30 2023
December 31 2022
Three Months Ended September 30
Nine Months Ended September 30
(Dollars in millions)
2023
2022
2023
2022
California
$
81,168
$
80,878
$
671
$
656
$
1
$
(2)
$
—
$
38
New York
26,031
26,228
331
328
—
(1)
3
4
Florida
15,445
15,225
135
145
—
—
(2)
(1)
Texas
9,404
9,399
93
88
—
—
1
1
New Jersey
8,724
8,810
99
96
—
(1)
(1)
2
Other
77,352
77,436
856
854
1
1
4
29
Residential mortgage loans
$
218,124
$
217,976
$
2,185
$
2,167
$
2
$
(3)
$
5
$
73
Fully-insured loan portfolio
11,042
11,694
Total residential mortgage loan portfolio
$
229,166
$
229,670
(1)Outstandings and nonperforming loans exclude loans accounted for under the fair value option.
Bank of America 32
Home Equity
At September 30, 2023, the home equity portfolio made up six percent of the consumer portfolio and was comprised of home equity lines of credit (HELOCs), home equity loans and reverse mortgages. HELOCs generally have an initial draw period of 10 years, and after the initial draw period ends, the loans generally convert to 15- or 20-year amortizing loans. We no longer originate home equity loans or reverse mortgages.
At September 30, 2023, 83 percent of the home equity portfolio was in Consumer Banking, seven percent was in All Other and the remainder of the portfolio was primarily in GWIM. Outstanding balances in the home equity portfolio decreased $1.1 billion during the nine months ended September 30, 2023 primarily due to paydowns outpacing draws on existing lines and
new originations. Of the total home equity portfolio at September 30, 2023 and December 31, 2022, $10.2 billion and $11.1 billion, or 40 percent and 42 percent, were in first-lien positions. At September 30, 2023, outstanding balances in the home equity portfolio that were in a second-lien or more junior-lien position and where we also held the first-lien loan totaled $4.4 billion, or 17 percent, of our total home equity portfolio.
Unused HELOCs totaled $45.0 billion and $42.4 billion at September 30, 2023 and December 31, 2022. The HELOC utilization rate was 35 percent and 38 percent at September 30, 2023 and December 31, 2022.
Table 21 presents certain home equity portfolio key credit statistics.
Table 21
Home Equity – Key Credit Statistics (1)
(Dollars in millions)
September 30 2023
December 31 2022
Outstandings
$
25,492
$
26,563
Accruing past due 30 days or more
94
96
Nonperforming loans (2)
479
510
Percent of portfolio
Refreshed CLTV greater than 90 but less than or equal to 100
—
%
—
%
Refreshed CLTV greater than 100
—
—
Refreshed FICO below 620
3
2
(1)Outstandings, accruing past due, nonperforming loans and percentages of the portfolio exclude loans accounted for under the fair value option.
(2)Includes loans that are contractually current that have not yet demonstrated a sustained period of payment performance following a modification.
Nonperforming outstanding balances in the home equity portfolio decreased $31 million to $479 million at September 30, 2023, primarily driven by returns to performing status and paydowns outpacing new additions. Of the nonperforming home equity loans at September 30, 2023, $273 million, or 57 percent, were current on contractual payments. In addition, $118 million, or 25 percent, were 180 days or more past due and had been written down to the estimated fair value of the collateral, less costs to sell. Accruing loans that were 30 days or more past due remained relatively unchanged during the nine months ended September 30, 2023.
Of the $25.5 billion in total home equity portfolio outstandings at September 30, 2023, as shown in Table 21, 11 percent require interest-only payments. The outstanding balance of HELOCs that had reached the end of their draw period and entered the amortization period was $4.3 billion at
September 30, 2023. The HELOCs that have entered the amortization period have experienced a higher percentage of early stage delinquencies and nonperforming status when compared to the HELOC portfolio as a whole. At September 30, 2023, $45 million, or one percent, of outstanding HELOCs that had entered the amortization period were accruing past due 30 days or more. In addition, at September 30, 2023, $310 million, or seven percent, were nonperforming.
For our interest-only HELOC portfolio, we do not actively track how many of our home equity customers pay only the minimum amount due on their home equity loans and lines; however, we can infer some of this information through a review of our HELOC portfolio that we service and is still in its revolving period. During the three months ended September 30, 2023, 29 percent of these customers with an outstanding balance did not pay any principal on their HELOCs.
33Bank of America
Table 22 presents outstandings, nonperforming balances and net recoveries by certain state concentrations for the home equity portfolio. In the New York area, the New York-Northern New Jersey-Long Island MSA made up 12 percent of the outstanding home equity portfolio at both September 30, 2023
and December 31, 2022. The Los Angeles-Long Beach-Santa Ana MSA within California made up 10 percent and 11 percent of the outstanding home equity portfolio at September 30, 2023 and December 31, 2022.
Table 22
Home Equity State Concentrations
Outstandings (1)
Nonperforming (1)
Net Charge-Offs
September 30 2023
December 31 2022
September 30 2023
December 31 2022
Three Months Ended September 30
Nine Months Ended September 30
(Dollars in millions)
2023
2022
2023
2022
California
$
6,948
$
7,406
$
116
$
119
$
(3)
$
(4)
$
(5)
$
(17)
Florida
2,599
2,743
57
63
(3)
(5)
(8)
(18)
New Jersey
1,898
2,047
48
53
—
(1)
(3)
(1)
New York
1,637
1,806
75
80
(2)
(1)
(6)
(4)
Texas
1,358
1,284
15
14
—
—
—
—
Other
11,052
11,277
168
181
(6)
(7)
(20)
(32)
Total home equity loan portfolio
$
25,492
$
26,563
$
479
$
510
$
(14)
$
(18)
$
(42)
$
(72)
(1)Outstandings and nonperforming loans exclude loans accounted for under the fair value option.
Credit Card
At September 30, 2023, 97 percent of the credit card portfolio was managed in Consumer Banking with the remainder in GWIM. Outstandings in the credit card portfolio increased $6.3 billion during the nine months ended September 30, 2023 to $99.7 billion as purchase volume and card transfers more than offset payments. Net charge-offs increased $345 million to $673 million and $836 million to $1.8 billion during the three and nine months ended September 30, 2023 compared to the same periods in 2022, primarily due to late-stage delinquent
credit card loans that were charged off. Credit card loans 30 days or more past due and still accruing interest increased $592 million, and 90 days or more past due and still accruing interest increased $299 million at September 30, 2023.
Unused lines of credit for credit card increased to $391.3 billion at September 30, 2023 from $370.1 billion at December 31, 2022.
Table 23 presents certain state concentrations for the credit card portfolio.
Table 23
Credit Card State Concentrations
Outstandings
Accruing Past Due 90 Days or More
Net Charge-offs
September 30 2023
December 31 2022
September 30 2023
December 31 2022
Three Months Ended September 30
Nine Months Ended September 30
(Dollars in millions)
2023
2022
2023
2022
California
$
16,418
$
15,363
$
178
$
126
$
120
$
58
$
317
$
164
Florida
10,205
9,512
139
100
89
44
238
130
Texas
8,767
8,125
104
72
64
30
169
87
New York
5,702
5,381
72
56
52
25
142
71
Washington
5,217
4,844
33
21
21
9
53
25
Other
53,378
50,196
490
342
327
162
865
471
Total credit card portfolio
$
99,687
$
93,421
$
1,016
$
717
$
673
$
328
$
1,784
$
948
Direct/Indirect Consumer
At September 30, 2023, 52 percent of the direct/indirect portfolio was included in Consumer Banking (consumer auto and recreational vehicle lending) and 48 percent was included in GWIM (principally securities-based lending loans). Outstandings
in the direct/indirect portfolio decreased $2.2 billion during the nine months ended September 30, 2023 to $104.1 billion driven by declines in securities-based lending stemming from higher paydown activity due to higher interest rates, partially offset by growth in our auto portfolio.
Bank of America 34
Table 24 presents certain state concentrations for the direct/indirect consumer loan portfolio.
Table 24
Direct/Indirect State Concentrations
Outstandings
Nonperforming
Net Charge-offs
September 30 2023
December 31 2022
September 30 2023
December 31 2022
Three Months Ended September 30
Nine Months Ended September 30
(Dollars in millions)
2023
2022
2023
2022
California
$
15,193
$
15,516
$
23
$
12
$
5
$
1
$
11
$
4
Florida
13,606
13,783
15
10
3
2
6
2
Texas
9,743
9,837
13
9
2
2
5
3
New York
7,491
7,891
9
5
2
1
4
2
New Jersey
4,341
4,456
4
3
1
1
2
1
Other
53,685
54,753
64
38
12
2
15
5
Total direct/indirect loan portfolio
$
104,059
$
106,236
$
128
$
77
$
25
$
9
$
43
$
17
Other Consumer
Other consumer primarily consists of deposit overdraft balances. Net charge-offs increased $29 million to $387 million during the nine months ended September 30, 2023 compared to the same period in 2022, primarily driven by higher overdraft losses due to industry-wide increases in check fraud activity.
Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity
Table 25 presents nonperforming consumer loans, leases and foreclosed properties activity for the three and nine months ended September 30, 2023 and 2022. Nonperforming
consumer loans of $2.8 billion remained relatively unchanged during the nine months ended September 30, 2023.
At September 30, 2023, $502 million, or 18 percent, of nonperforming loans were 180 days or more past due and had been written down to their estimated property value less costs to sell. In addition, at September 30, 2023, $1.6 billion, or 59 percent, of nonperforming consumer loans were current and classified as nonperforming loans in accordance with applicable policies.
Foreclosed properties decreased $9 million during the nine months ended September 30, 2023 to $112 million.
Table 25
Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity
Three Months Ended September 30
Nine Months Ended September 30
(Dollars in millions)
2023
2022
2023
2022
Nonperforming loans and leases, beginning of period
$
2,729
$
2,866
$
2,754
$
2,989
Additions
297
236
808
1,245
Reductions:
Paydowns and payoffs
(117)
(124)
(351)
(446)
Sales
(2)
(1)
(6)
(401)
Returns to performing status (1)
(91)
(193)
(353)
(552)
Charge-offs
(13)
(12)
(38)
(50)
Transfers to foreclosed properties
(11)
(12)
(22)
(25)
Total net additions/(reductions) to nonperforming loans and leases
63
(106)
38
(229)
Total nonperforming loans and leases, September 30
2,792
2,760
2,792
2,760
Foreclosed properties, September 30
112
125
112
125
Nonperforming consumer loans, leases and foreclosed properties, September 30 (2)
$
2,904
$
2,885
$
2,904
$
2,885
Nonperforming consumer loans and leases as a percentage of outstanding consumer loans and leases (3)
0.61
%
0.61
%
Nonperforming consumer loans, leases and foreclosed properties as a percentage of outstanding consumer loans, leases and foreclosed properties (3)
0.63
0.64
(1)Consumer loans may be returned to performing status when all principal and interest is current and full repayment of the remaining contractual principal and interest is expected, or when the loan otherwise becomes well-secured and is in the process of collection.
(2)Includes repossessed non-real estate assets of $19 million for both the three and nine months ended September 30, 2023 and $0 million for both the three and nine months ended September 30, 2022.
(3)Outstanding consumer loans and leases exclude loans accounted for under the fair value option.
Commercial Portfolio Credit Risk Management
Commercial credit risk is evaluated and managed with the goal that concentrations of credit exposure continue to be aligned with our risk appetite. We review, measure and manage concentrations of credit exposure by industry, product, geography, customer relationship and loan size. We also review, measure and manage commercial real estate loans by geographic location and property type. In addition, within our non-U.S. portfolio, we evaluate exposures by region and by country. Tables 30, 32 and 35 summarize our concentrations. We also utilize syndications of exposure to third parties, loan sales, hedging and other risk mitigation techniques to manage
the size and risk profile of the commercial credit portfolio. For more information on our industry concentrations, see Table 32 and Commercial Portfolio Credit Risk Management – Industry Concentrations on page 39.
For more information on our accounting policies regarding delinquencies, nonperforming status, net charge-offs and loan modifications for the commercial portfolio, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K and Note 5 – Outstanding Loans and Leases and Allowance for Credit Losses to the Consolidated Financial Statements.
35Bank of America
Commercial Credit Portfolio
Outstanding commercial loans and leases increased $1.0 billion during the nine months ended September 30, 2023 due to growth in commercial real estate, primarily in Global Banking, and U.S. small business commercial. During the nine months ended September 30, 2023, commercial credit quality deteriorated as nonperforming commercial loans and reservable criticized utilized exposure increased primarily driven by the commercial real estate office property type; however, the commercial net charge-off ratio of 0.10 percent for the nine months ended September 30, 2023 remained low.
With the exception of the office property type, which is further discussed in the Commercial Real Estate section herein, credit quality of commercial real estate borrowers has remained relatively stable since December 31, 2022; however, we are closely monitoring borrower performance in the increased rate environment and emerging trends. Many commercial real estate markets are still experiencing disruptions in demand, supply chain challenges, tenant difficulties and challenging capital markets. Recent demand for office space has been stagnant, and future demand for office space continues to be uncertain as companies evaluate space needs with employment models that utilize a mix of remote and conventional office use.
The commercial allowance for loan and lease losses decreased $325 million during the nine months ended September 30, 2023 to $5.1 billion, primarily driven by certain improved macroeconomic conditions. For more information, see Allowance for Credit Losses on page 42.
Total commercial utilized credit exposure decreased $4.0 billion during the nine months ended September 30, 2023 to $700.9 billion primarily driven by lower standby letters of credit (SBLCs) and financial guarantees and debt securities and other investments. The utilization rate for loans and leases, SBLCs and financial guarantees, and commercial letters of credit, in the aggregate, was 55 percent and 56 percent at September 30, 2023 and December 31, 2022.
Table 26 presents commercial credit exposure by type for utilized, unfunded and total binding committed credit exposure. Commercial utilized credit exposure includes SBLCs and financial guarantees and commercial letters of credit that have been issued and for which we are legally bound to advance funds under prescribed conditions during a specified time period, and excludes exposure related to trading account assets. Although funds have not yet been advanced, these exposure types are considered utilized for credit risk management purposes.
Table 26
Commercial Credit Exposure by Type
Commercial Utilized (1)
Commercial Unfunded (2, 3, 4)
Total Commercial Committed
(Dollars in millions)
September 30 2023
December 31 2022
September 30 2023
December 31 2022
September 30 2023
December 31 2022
Loans and leases
$
590,370
$
589,362
$
507,139
$
487,772
$
1,097,509
$
1,077,134
Derivative assets (5)
47,464
48,642
—
—
47,464
48,642
Standby letters of credit and financial guarantees
31,601
33,376
1,833
1,266
33,434
34,642
Debt securities and other investments
17,922
20,195
3,705
2,551
21,627
22,746
Loans held-for-sale
6,377
6,112
2,332
3,729
8,709
9,841
Operating leases
5,368
5,509
—
—
5,368
5,509
Commercial letters of credit
947
973
254
28
1,201
1,001
Other
856
698
—
—
856
698
Total
$
700,905
$
704,867
$
515,263
$
495,346
$
1,216,168
$
1,200,213
(1)Commercial utilized exposure includes loans of $4.0 billion and $5.4 billion accounted for under the fair value option at September 30, 2023 and December 31, 2022.
(2)Commercial unfunded exposure includes commitments accounted for under the fair value option with a notional amount of $1.8 billion and $3.0 billion at September 30, 2023 and December 31, 2022.
(3)Excludes unused business card lines, which are not legally binding.
(4)Includes the notional amount of unfunded legally binding lending commitments, net of amounts distributed (i.e., syndicated or participated) to other financial institutions. The distributed amounts were $10.6 billion and $10.4 billion at September 30, 2023 and December 31, 2022.
(5)Derivative assets are carried at fair value, reflect the effects of legally enforceable master netting agreements and have been reduced by cash collateral of $32.9 billion and $33.8 billion at September 30, 2023 and December 31, 2022. Not reflected in utilized and committed exposure is additional non-cash derivative collateral held of $53.9 billion and $51.6 billion at September 30, 2023 and December 31, 2022, which consists primarily of other marketable securities.
Nonperforming commercial loans increased $987 million during the nine months ended September 30, 2023 primarily in commercial real estate, partially offset by non-U.S. commercial. Table 27 presents our commercial loans and leases portfolio and related credit quality information at September 30, 2023 and December 31, 2022.
Bank of America 36
Table 27
Commercial Credit Quality
Outstandings
Nonperforming
Accruing Past Due 90 Days or More
(Dollars in millions)
September 30 2023
December 31 2022
September 30 2023
December 31 2022
September 30 2023
December 31 2022
Commercial and industrial:
U.S. commercial
$
356,330
$
358,481
$
561
$
553
$
85
$
190
Non-U.S. commercial
123,713
124,479
102
212
4
25
Total commercial and industrial
480,043
482,960
663
765
89
215
Commercial real estate
73,193
69,766
1,343
271
6
46
Commercial lease financing
13,904
13,644
18
4
5
8
567,140
566,370
2,024
1,040
100
269
U.S. small business commercial (1)
19,233
17,560
17
14
185
355
Commercial loans excluding loans accounted for under the fair value option
$
586,373
$
583,930
$
2,041
$
1,054
$
285
$
624
Loans accounted for under the fair value option (2)
3,997
5,432
Total commercial loans and leases
$
590,370
$
589,362
(1)Includes card-related products.
(2)Commercial loans accounted for under the fair value option includes U.S. commercial of $2.5 billion and $2.9 billion and non-U.S. commercial of $1.5 billion and $2.5 billion at September 30, 2023 and December 31, 2022. For more information on the fair value option, see Note 15 – Fair Value Option to the Consolidated Financial Statements.
Table 28 presents net charge-offs and related ratios for our commercial loans and leases for the three and nine months ended September 30, 2023 and 2022.
Table 28
Commercial Net Charge-offs and Related Ratios
Net Charge-offs
Net Charge-off Ratios (1)
Three Months Ended September 30
Nine Months Ended September 30
Three Months Ended September 30
Nine Months Ended September 30
(Dollars in millions)
2023
2022
2023
2022
2023
2022
2023
2022
Commercial and industrial:
U.S. commercial
$
5
$
23
$
57
$
24
0.01
%
0.03
%
0.02
%
0.01
%
Non-U.S. commercial
(2)
(6)
18
(10)
(0.01)
(0.02)
0.02
(0.01)
Total commercial and industrial
3
17
75
14
—
0.01
0.02
—
Commercial real estate
39
13
130
32
0.21
0.08
0.24
0.07
Commercial lease financing
3
(1)
3
3
0.08
(0.05)
0.02
0.03
45
29
208
49
0.03
0.02
0.05
0.01
U.S. small business commercial
82
32
222
110
1.74
0.72
1.62
0.82
Total commercial
$
127
$
61
$
430
$
159
0.09
0.04
0.10
0.04
(1)Net charge-off ratios are calculated as annualized net charge-offs divided by average outstanding loans and leases, excluding loans accounted for under the fair value option.
Table 29 presents commercial reservable criticized utilized exposure by loan type. Criticized exposure corresponds to the Special Mention, Substandard and Doubtful asset categories as defined by regulatory authorities. Total commercial reservable criticized utilized exposure increased $4.4 billion during the nine
months ended September 30, 2023 driven by the commercial real estate office property type and U.S. commercial, partially offset by non-U.S. commercial. At both September 30, 2023 and December 31, 2022, 88 percent of commercial reservable criticized utilized exposure was secured.
Total commercial reservable criticized utilized exposure
$
23,722
3.83
$
19,274
3.12
(1)Total commercial reservable criticized utilized exposure includes loans and leases of $22.8 billion and $18.5 billion and commercial letters of credit of $920 million and $817 million at September 30, 2023 and December 31, 2022.
(2)Percentages are calculated as commercial reservable criticized utilized exposure divided by total commercial reservable utilized exposure for each exposure category.
37Bank of America
Commercial and Industrial
Commercial and industrial loans include U.S. commercial and non-U.S. commercial portfolios.
U.S. Commercial
At September 30, 2023, 62 percent of the U.S. commercial loan portfolio, excluding small business, was managed in Global Banking, 22 percent in Global Markets, 14 percent in GWIM (loans that provide financing for asset purchases, business investments and other liquidity needs for high net worth clients) and the remainder primarily in Consumer Banking. U.S. commercial loans decreased $2.2 billion, or one percent, during the nine months ended September 30, 2023 primarily driven by Global Banking. Reservable criticized utilized exposure increased $2.0 billion, or 19 percent, driven by increases across a broad range of industries.
Non-U.S. Commercial
At September 30, 2023, 63 percent of the non-U.S. commercial loan portfolio was managed in Global Banking, 36 percent in Global Markets and the remainder in GWIM. Non-U.S. commercial loans decreased $766 million, or one percent, during the nine months ended September 30, 2023 primarily driven by Global Banking. Reservable criticized utilized exposure decreased $598 million, or 22 percent, due to upgrades and sales of Russian exposure. For information on the non-U.S. commercial portfolio, see Non-U.S. Portfolio on page 41.
Commercial Real Estate
Commercial real estate primarily includes commercial loans secured by non-owner-occupied real estate and is dependent on the sale or lease of the real estate as the primary source of repayment. Outstanding loans increased $3.4 billion, or five percent, during the nine months ended September 30, 2023 to
$73.2 billion with increases across multiple property types. The commercial real estate portfolio is primarily managed in Global Banking and consists of loans made primarily to public and private developers, and commercial real estate firms. The portfolio remains diversified across property types and geographic regions. California represented the largest state concentration at 20 percent and 19 percent of commercial real estate at September 30, 2023 and December 31, 2022.
Reservable criticized utilized exposure increased $3.0 billion, or 57 percent, during the nine months ended September 30, 2023, primarily driven by office loans. Office loans represented the largest property type concentration at 25 percent of the commercial real estate portfolio at September 30, 2023, but only represented approximately two percent of total loans for the Corporation. This property type is roughly 75 percent Class A and has origination loan-to-value of approximately 55 percent. Reservable criticized exposure for the office property type was $5.1 billion at September 30, 2023, and approximately $8.7 billion of office loans are scheduled to mature by the end of 2024. Although we have seen collateral value declines in this property type, the majority of these loans remain adequately secured as of September 30, 2023.
For the three and nine months ended September 30, 2023 and 2022, we continued to see low default rates. We use a number of proactive risk mitigation initiatives to reduce adversely rated exposure in the commercial real estate portfolio, including transfers of deteriorating exposures for management by independent special asset officers and the pursuit of loan restructurings or asset sales to achieve the best results for our customers and the Corporation.
Table 30 presents outstanding commercial real estate loans by geographic region, based on the geographic location of the collateral, and by property type.
Table 30
Outstanding Commercial Real Estate Loans
(Dollars in millions)
September 30 2023
December 31 2022
By Geographic Region
Northeast
$
15,964
$
15,601
California
14,387
13,360
Southwest
9,401
8,723
Southeast
8,336
7,713
Florida
5,119
5,374
Midwest
3,445
3,419
Illinois
3,425
3,327
Midsouth
2,719
2,716
Northwest
2,030
1,959
Non-U.S.
5,933
5,518
Other
2,434
2,056
Total outstanding commercial real estate loans
$
73,193
$
69,766
By Property Type
Non-residential
Office
$
18,122
$
18,230
Industrial / Warehouse
14,430
13,775
Multi-family rental
11,232
10,412
Shopping centers / Retail
5,806
5,830
Hotel / Motels
5,569
5,696
Multi-use
2,762
2,403
Other
14,115
12,241
Total non-residential
72,036
68,587
Residential
1,157
1,179
Total outstanding commercial real estate loans
$
73,193
$
69,766
Bank of America 38
U.S. Small Business Commercial
The U.S. small business commercial loan portfolio is comprised of small business card loans and small business loans primarily managed in Consumer Banking, and included $415 million and $1.0 billion of PPP loans outstanding at September 30, 2023 and December 31, 2022. PPP loans decreased $593 million during the nine months ended September 30, 2023 primarily due to repayment of the loans by the Small Business Administration (SBA) under the terms of the program. Excluding PPP, credit card-related products were 55 percent and 53 percent of the U.S. small business commercial portfolio at September 30, 2023 and December 31, 2022 and represented 100 percent and 99 percent of the net charge-offs for the three and nine months ended September 30, 2023 compared to 100 percent for both the three and nine months ended September 30, 2022. The decrease of $170 million in accruing past due 90 days or more for the nine months ended September 30, 2023 was driven by the repayment of PPP loans, which are fully guaranteed by the SBA.
Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity
Table 31 presents the nonperforming commercial loans, leases and foreclosed properties activity during the three and nine months ended September 30, 2023 and 2022. Nonperforming loans do not include loans accounted for under the fair value option. During the nine months ended September 30, 2023, nonperforming commercial loans and leases increased $987 million to $2.0 billion. At September 30, 2023, 99 percent of commercial nonperforming loans, leases and foreclosed properties were secured, and 63 percent were contractually current. Commercial nonperforming loans were carried at 89 percent of their unpaid principal balance, as the carrying value of these loans has been reduced to the estimated collateral value less costs to sell.
Table 31
Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity (1, 2)
Three Months Ended September 30
Nine Months Ended September 30
(Dollars in millions)
2023
2022
2023
2022
Nonperforming loans and leases, beginning of period
$
1,397
$
1,298
$
1,054
$
1,578
Additions
875
307
1,778
811
Reductions:
Paydowns
(153)
(180)
(396)
(681)
Sales
—
(12)
(3)
(53)
Returns to performing status (3)
(2)
(148)
(61)
(299)
Charge-offs
(67)
(42)
(242)
(94)
Transfers to foreclosed properties
—
—
(23)
—
Transfers to loans held-for-sale
(9)
—
(66)
(39)
Total net additions / (reductions) to nonperforming loans and leases
644
(75)
987
(355)
Total nonperforming loans and leases, September 30
2,041
1,223
2,041
1,223
Foreclosed properties, September 30
48
48
48
48
Nonperforming commercial loans, leases and foreclosed properties, September 30
$
2,089
$
1,271
$
2,089
$
1,271
Nonperforming commercial loans and leases as a percentage of outstanding commercial loans and leases (4)
0.35
%
0.21
%
Nonperforming commercial loans, leases and foreclosed properties as a percentage of outstanding commercial loans, leases and foreclosed properties (4)
0.36
0.22
(1)Balances do not include nonperforming loans held-for-sale of $173 million and $222 million at September 30, 2023 and 2022.
(2)Includes U.S. small business commercial activity. Small business card loans are excluded as they are not classified as nonperforming.
(3)Commercial loans and leases may be returned to performing status when all principal and interest is current and full repayment of the remaining contractual principal and interest is expected, when the loan otherwise becomes well-secured and is in the process of collection, or when a modified loan demonstrates a sustained period of payment performance.
(4)Outstanding commercial loans exclude loans accounted for under the fair value option.
Industry Concentrations
Table 32 presents commercial committed and utilized credit exposure by industry. For information on net notional credit protection purchased to hedge funded and unfunded exposures for which we elected the fair value option, as well as certain other credit exposures, see Commercial Portfolio Credit Risk Management – Risk Mitigation.
Commercial credit exposure is diversified across a broad range of industries. Total commercial committed exposure increased $16.0 billion during the nine months ended September 30, 2023 to $1.2 trillion. The increase in commercial committed exposure was concentrated in Asset managers and funds, Capital goods, and Retailing.
For information on industry limits, see Commercial Portfolio Credit Risk Management – Industry Concentrations in the MD&Aof the Corporation’s 2022 Annual Report on Form 10-K.
Asset managers and funds, our largest industry concentration with committed exposure of $173.5 billion, increased $8.4 billion, primarily driven by exposure to the Capital markets industry group during the nine months ended September 30, 2023.
Real estate, our second largest industry concentration with committed exposure of $99.8 billion remained relatively unchanged during the nine months ended September 30, 2023. For more information on the commercial real estate and related portfolios, see Commercial Portfolio Credit Risk Management – Commercial Real Estate on page 38.
Capital goods, our third largest industry concentration with committed exposure of $93.3 billion, increased $6.0 billion, or seven percent, during the nine months ended September 30, 2023. The increase in committed exposure occurred primarily as a result of increases in Trading companies and distributors and Machinery, partially offset by a decrease in Industrial conglomerates.
There is uncertainty in the U.S. and global economies due to various macroeconomic challenges including geopolitical, inflationary pressures and elevated interest rates, and a number of industries may continue to be adversely impacted due to these conditions. We continue to monitor all industries, particularly higher risk industries that are experiencing or could experience a more significant impact to their financial condition.
39Bank of America
Table 32
Commercial Credit Exposure by Industry (1)
Commercial Utilized
Total Commercial
Committed (2)
(Dollars in millions)
September 30 2023
December 31 2022
September 30 2023
December 31 2022
Asset managers and funds
$
106,525
$
106,842
$
173,531
$
165,087
Real estate (3)
73,318
72,180
99,840
99,722
Capital goods
48,858
45,580
93,327
87,314
Finance companies
56,733
55,248
81,968
79,546
Healthcare equipment and services
34,986
33,554
61,151
58,761
Retailing
26,261
24,785
57,664
53,714
Materials
25,132
26,304
55,496
55,589
Food, beverage and tobacco
22,609
23,232
49,678
47,486
Consumer services
27,735
26,980
49,395
47,372
Government and public education
32,058
34,861
46,602
48,134
Individuals and trusts
32,297
34,897
43,323
45,572
Commercial services and supplies
24,089
23,628
42,992
41,596
Utilities
17,806
20,292
38,220
40,164
Transportation
24,004
22,273
36,607
33,858
Energy
13,855
15,132
36,312
36,043
Global commercial banks
27,544
27,217
30,313
29,293
Technology hardware and equipment
10,796
11,441
29,812
29,825
Media
14,427
14,781
25,817
28,216
Software and services
10,160
12,961
24,839
25,633
Insurance
11,357
10,224
21,811
19,444
Vehicle dealers
14,359
12,909
21,334
20,638
Consumer durables and apparel
9,437
10,009
20,462
21,389
Pharmaceuticals and biotechnology
7,294
7,547
20,244
26,208
Telecommunication services
9,276
9,679
17,005
17,349
Automobiles and components
7,207
8,774
15,447
16,911
Food and staples retailing
7,973
7,157
13,698
11,908
Financial markets infrastructure (clearinghouses)
2,409
3,913
4,762
8,752
Religious and social organizations
2,400
2,467
4,518
4,689
Total commercial credit exposure by industry
$
700,905
$
704,867
$
1,216,168
$
1,200,213
(1)Includes U.S. small business commercial exposure.
(2)Includes the notional amount of unfunded legally binding lending commitments, net of amounts distributed (i.e., syndicated or participated) to other financial institutions. The distributed amounts were $10.6 billion and $10.4 billion at September 30, 2023 and December 31, 2022.
(3)Industries are viewed from a variety of perspectives to best isolate the perceived risks. For purposes of this table, the real estate industry is defined based on the primary business activity of the borrowers or counterparties using operating cash flows and primary source of repayment as key factors.
Risk Mitigation
We purchase credit protection to cover the funded portion as well as the unfunded portion of certain credit exposures. To lower the cost of obtaining our desired credit protection levels, we may add credit exposure within an industry, borrower or counterparty group by selling protection.
At September 30, 2023 and December 31, 2022, net notional credit default protection purchased in our credit derivatives portfolio to hedge our funded and unfunded exposures for which we elected the fair value option, as well as certain other credit exposures, was $8.9 billion and $9.0 billion. We recorded net losses of $23 million and $134 million for the three and nine months ended September 30, 2023 compared to net losses of $56 million and $66 million for the three and nine months ended September 30, 2022. The gains and losses on these instruments were largely offset by gains and losses on the related exposures. The Value-at-Risk (VaR) results for these exposures are included in the fair value option portfolio information in Table 38. For more information, see Trading Risk Management on page 44.
Tables 33 and 34 present the maturity profiles and the credit exposure debt ratings of the net credit default protection portfolio at September 30, 2023 and December 31, 2022.
Table 33
Net Credit Default Protection by Maturity
September 30 2023
December 31 2022
Less than or equal to one year
52
%
14
%
Greater than one year and less than or equal to five years
47
85
Greater than five years
1
1
Total net credit default protection
100
%
100
%
Table 34
Net Credit Default Protection by Credit Exposure Debt Rating
Net Notional (1)
Percent of Total
Net Notional (1)
Percent of Total
(Dollars in millions)
September 30, 2023
December 31, 2022
Ratings (2, 3)
AAA
$
(479)
5.4
%
$
(379)
4.0
%
AA
(865)
9.7
(867)
10.0
A
(4,222)
47.5
(3,257)
36.0
BBB
(1,921)
21.6
(2,476)
28.0
BB
(736)
8.3
(1,049)
12.0
B
(597)
6.7
(676)
7.0
CCC and below
(73)
0.8
(93)
1.0
NR (4)
2
—
(182)
2.0
Total net credit
default protection
$
(8,891)
100.0
%
$
(8,979)
100.0
%
(1)Represents net credit default protection purchased.
(2)Ratings are refreshed on a quarterly basis.
(3)Ratings of BBB- or higher are considered to meet the definition of investment grade.
(4)NR is comprised of index positions held and any names that have not been rated.
Bank of America 40
For more information on credit derivatives and counterparty credit risk valuation adjustments, see Note 3 – Derivatives to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K.
Non-U.S. Portfolio
Our non-U.S. credit and trading portfolios are subject to country risk. We define country risk as the risk of loss from unfavorable economic and political conditions, currency fluctuations, social instability and changes in government policies. A risk management framework is in place to measure, monitor and manage non-U.S. risk and exposures. In addition to the direct risk of doing business in a country, we also are exposed to indirect country risks (e.g., related to the collateral received on secured financing transactions or related to client clearing
activities). These indirect exposures are managed in the normal course of business through credit, market and operational risk governance rather than through country risk governance. For more information on our non-U.S. credit and trading portfolios, see Non-U.S. Portfolio in the MD&Aof the Corporation’s 2022 Annual Report on Form 10-K. For more information on risks related to our non-U.S. portfolio, see the Geopolitical section within Item 1A. Risk Factors of the Corporation’s 2022 Annual Report on Form 10-K.
Table 35 presents our 20 largest non-U.S. country exposures at September 30, 2023. These exposures accounted for 89 percent of our total non-U.S. exposure at both September 30, 2023 and December 31, 2022. Net country exposure for these 20 countries decreased $27.0 billion in 2023 primarily driven by decreases in Germany, Japan and France.
Table 35
Top 20 Non-U.S. Countries Exposure
(Dollars in millions)
Funded Loans and Loan Equivalents
Unfunded Loan Commitments
Net Counterparty Exposure
Securities/ Other Investments
Country Exposure at September 30 2023
Hedges and Credit Default Protection
Net Country Exposure at September 30 2023
Increase (Decrease) from December 31 2022
United Kingdom
$
26,274
$
18,599
$
7,991
$
4,606
$
57,470
$
(3,037)
$
54,433
$
(912)
Germany
21,785
9,912
1,325
2,563
35,585
(2,224)
33,361
(12,365)
Canada
12,090
9,625
1,085
3,501
26,301
(416)
25,885
312
France
14,031
7,956
901
1,433
24,321
(2,312)
22,009
(4,584)
Australia
13,915
5,045
721
2,438
22,119
(286)
21,833
1,616
Japan
8,505
1,792
1,432
4,592
16,321
(800)
15,521
(7,566)
Brazil
9,072
1,265
607
3,983
14,927
(55)
14,872
2,372
India
7,017
221
626
3,491
11,355
(43)
11,312
543
Ireland
8,073
1,347
148
240
9,808
(21)
9,787
697
Singapore
4,562
491
214
4,220
9,487
(19)
9,468
(139)
South Korea
6,002
897
619
1,743
9,261
(41)
9,220
94
China
5,040
317
841
3,102
9,300
(238)
9,062
(1,746)
Mexico
4,894
1,635
530
1,477
8,536
(57)
8,479
1,087
Switzerland
4,808
3,328
370
283
8,789
(773)
8,016
(2,672)
Netherlands
2,814
4,394
822
414
8,444
(1,689)
6,755
(2,528)
Hong Kong
4,170
618
382
1,096
6,266
(15)
6,251
(1,020)
Spain
2,779
1,851
155
945
5,730
(386)
5,344
(497)
Italy
3,676
1,371
235
672
5,954
(787)
5,167
(501)
Belgium
1,536
1,513
345
1,021
4,415
(214)
4,201
338
Sweden
1,326
1,810
111
219
3,466
(406)
3,060
456
Total top 20 non-U.S. countries exposure
$
162,369
$
73,987
$
19,460
$
42,039
$
297,855
$
(13,819)
$
284,036
$
(27,015)
Our largest non-U.S. country exposure at September 30, 2023 was the United Kingdom with net exposure of $54.4 billion, which represents a decrease of $912 million from December 31, 2022. The decrease was primarily driven by lower
exposure with financial institutions. Our second largest non-U.S. country exposure was Germany with net exposure of $33.4 billion at September 30, 2023, a decrease of $12.4 billion from December 31, 2022. The decrease was primarily driven by lower deposits with the central bank.
41Bank of America
Allowance for Credit Losses
The allowance for credit losses increased $418 million from December 31, 2022 to $14.6 billion at September 30, 2023, which included a $921 million reserve increase related to the consumer portfolio and a $503 million reserve decrease related to the commercial portfolio. The increase in the allowance reflected a reserve build in our consumer portfolio primarily due to credit card loan growth and asset quality, partially offset by a reserve release in our commercial portfolio primarily driven by certain improved macroeconomic conditions. The allowance also
includes the impact of the accounting change to remove the recognition and measurement guidance on troubled debt restructurings, which reduced the allowance for credit losses by $243 million on January 1, 2023. For more information on this change in accounting guidance, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements.
Table 36 presents an allocation of the allowance for credit losses by product type at September 30, 2023 and December 31, 2022.
Table 36
Allocation of the Allowance for Credit Losses by Product Type
Amount
Percent of Total
Percent of Loans and Leases
Outstanding (1)
Amount
Percent of Total
Percent of Loans and Leases
Outstanding (1)
(Dollars in millions)
September 30, 2023
December 31, 2022
Allowance for loan and lease losses
Residential mortgage
$
344
2.59
%
0.15
%
$
328
2.59
%
0.14
%
Home equity
68
0.51
0.27
92
0.73
0.35
Credit card
6,987
52.59
7.01
6,136
48.38
6.57
Direct/Indirect consumer
671
5.05
0.64
585
4.61
0.55
Other consumer
97
0.73
n/m
96
0.76
n/m
Total consumer
8,167
61.47
1.78
7,237
57.07
1.59
U.S. commercial (2)
2,764
20.80
0.74
3,007
23.71
0.80
Non-U.S. commercial
918
6.91
0.74
1,194
9.41
0.96
Commercial real estate
1,393
10.48
1.90
1,192
9.40
1.71
Commercial lease financing
45
0.34
0.33
52
0.41
0.38
Total commercial
5,120
38.53
0.87
5,445
42.93
0.93
Allowance for loan and lease losses
13,287
100.00
%
1.27
12,682
100.00
%
1.22
Reserve for unfunded lending commitments
1,353
1,540
Allowance for credit losses
$
14,640
$
14,222
(1)Ratios are calculated as allowance for loan and lease losses as a percentage of loans and leases outstanding excluding loans accounted for under the fair value option.
(2)Includes allowance for loan and lease losses for U.S. small business commercial loans of $983 million and $844 million at September 30, 2023 and December 31, 2022.
n/m = not meaningful
Net charge-offs for the three and nine months ended September 30, 2023 were $931 million and $2.6 billion compared to $520 million and $1.5 billion for the same periods in 2022 primarily due to late-stage delinquent credit card loans that were charged off. The provision for credit losses increased $336 million to $1.2 billion and $1.8 billion to $3.3 billion for the three and nine months ended September 30, 2023 compared to the same periods in 2022. The provision for credit losses for the current-year periods was driven by our consumer portfolio primarily due to credit card loan growth and asset quality, partially offset by certain improved macroeconomic conditions that primarily benefited our commercial portfolio. In addition, provision for credit losses for the three months ended September 30, 2023 benefited from commercial net paydowns. For the three-month period in the prior year, the provision for credit losses was primarily driven by loan growth and a dampened macroeconomic outlook and the nine-month period was driven by the same factors as well as a reserve build related to Russian exposure, partially offset by asset quality improvement and reduced COVID-19 pandemic uncertainties.
The provision for credit losses for the consumer portfolio, including unfunded lending commitments, increased $496 million to $1.2 billion and $2.1 billion to $3.3 billion for the three and nine months ended September 30, 2023 compared to the same periods in 2022. The provision for credit losses for the commercial portfolio, including unfunded lending commitments, decreased $160 million to $16 million and decreased $278 million to $26 million for the three and nine months ended September 30, 2023 compared to the same periods in 2022.
Table 37 presents a rollforward of the allowance for credit losses, including certain loan and allowance ratios for the three and nine months ended September 30, 2023 and 2022. For more information on the Corporation’s credit loss accounting policies and activity related to the allowance for credit losses, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K and Note 5 – Outstanding Loans and Leases and Allowance for Credit Losses to the Consolidated Financial Statements.
Bank of America 42
Table 37
Allowance for Credit Losses
Three Months Ended September 30
Nine Months Ended September 30
(Dollars in millions)
2023
2022
2023
2022
Allowance for loan and lease losses, December 31
n/a
n/a
$
12,682
$
12,387
January 1, 2023 adoption of credit loss standard
n/a
n/a
(243)
n/a
Allowance for loan and lease losses, beginning of period
$
12,950
$
11,973
12,439
12,387
Loans and leases charged off
Residential mortgage
(8)
(5)
(26)
(155)
Home equity
(7)
(8)
(18)
(41)
Credit card
(814)
(487)
(2,220)
(1,452)
Direct/Indirect consumer
(57)
(63)
(153)
(184)
Other consumer
(123)
(146)
(406)
(371)
Total consumer charge-offs
(1,009)
(709)
(2,823)
(2,203)
U.S. commercial (1)
(131)
(85)
(371)
(239)
Non-U.S. commercial
—
(1)
(31)
(3)
Commercial real estate
(44)
(14)
(139)
(37)
Commercial lease financing
(3)
—
(3)
(5)
Total commercial charge-offs
(178)
(100)
(544)
(284)
Total loans and leases charged off
(1,187)
(809)
(3,367)
(2,487)
Recoveries of loans and leases previously charged off
Residential mortgage
6
8
21
82
Home equity
21
26
60
113
Credit card
141
159
436
504
Direct/Indirect consumer
32
54
110
167
Other consumer
5
3
19
13
Total consumer recoveries
205
250
646
879
U.S. commercial (2)
44
30
92
105
Non-U.S. commercial
2
7
13
13
Commercial real estate
5
1
9
5
Commercial lease financing
—
1
—
2
Total commercial recoveries
51
39
114
125
Total recoveries of loans and leases previously charged off
256
289
760
1,004
Net charge-offs
(931)
(520)
(2,607)
(1,483)
Provision for loan and lease losses
1,268
845
3,477
1,394
Other
—
4
(22)
4
Allowance for loan and lease losses, September 30
13,287
12,302
13,287
12,302
Reserve for unfunded lending commitments, beginning of period
1,388
1,461
1,540
1,456
Provision for unfunded lending commitments
(34)
53
(187)
57
Other
(1)
1
—
2
Reserve for unfunded lending commitments, September 30
1,353
1,515
1,353
1,515
Allowance for credit losses, September 30
$
14,640
$
13,817
$
14,640
$
13,817
Loan and allowance ratios (3) :
Loans and leases outstanding at September 30
$
1,044,899
$
1,027,615
$
1,044,899
$
1,027,615
Allowance for loan and lease losses as a percentage of total loans and leases outstanding at September 30
1.27
%
1.20
%
1.27
%
1.20
%
Consumer allowance for loan and lease losses as a percentage of total consumer loans and leases outstanding at September 30
1.78
1.53
1.78
1.53
Commercial allowance for loan and lease losses as a percentage of total commercial loans and leases outstanding at September 30
0.87
0.94
0.87
0.94
Average loans and leases outstanding
$
1,041,972
$
1,029,084
$
1,040,116
$
1,003,014
Annualized net charge-offs as a percentage of average loans and leases outstanding
0.35
%
0.20
%
0.34
%
0.20
%
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases at September 30
275
309
275
309
Ratio of the allowance for loan and lease losses at September 30 to annualized net charge-offs
3.60
5.96
3.81
6.20
Amounts included in allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases at September 30 (4)
$
5,330
$
6,746
$
5,330
$
6,746
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases, excluding the allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases at September 30 (4)
165
%
140
%
165
%
140
%
(1)Includes U.S. small business commercial charge-offs of $94 million and $254 million for the three and nine months ended September 30, 2023 compared to $43 million and $150 million for the same periods in 2022.
(2)Includes U.S. small business commercial recoveries of $12 million and $32 million for the three and nine months ended September 30, 2023 compared to $11 million and $40 million for the same periods in 2022.
(3)Ratios are calculated as allowance for loan and lease losses as a percentage of loans and leases outstanding excluding loans accounted for under the fair value option.
(4)Primarily includes amounts related to credit card and unsecured consumer lending portfolios in Consumer Banking.
n/a = not applicable
43Bank of America
Market Risk Management
For more information on our market risk management process, see Market Risk Management in the MD&A of the Corporation’s 2022 Annual Report on Form 10-K. For more information on market risks, see the Market section within Item 1A. Risk Factors of the Corporation’s 2022 Annual Report on Form 10-K.
Market risk is the risk that changes in market conditions may adversely impact the value of assets or liabilities, or otherwise negatively impact earnings. This risk is inherent in the financial instruments associated with our operations, primarily within our Global Markets segment. We are also exposed to these risks in other areas of the Corporation (e.g., our ALM activities). In the event of market stress, these risks could have a material impact on our results.
Trading Risk Management
To evaluate risks in our trading activities, we focus on the actual and potential volatility of revenues generated by individual positions as well as portfolios of positions. VaR is a common statistic used to measure market risk. Our primary VaR statistic is equivalent to a 99 percent confidence level, which means that for a VaR with a one-day holding period, there should not be losses in excess of VaR, on average, 99 out of 100 trading days.
Table 38 presents the total market-based portfolio VaR, which is the combination of the total covered positions (and less liquid trading positions) portfolio and the fair value option portfolio. For more information on the market risk VaR for trading activities, see Trading Risk Management in the MD&A of the Corporation’s 2022 Annual Report on Form 10-K.
The total market-based portfolio VaR results in Table 38 include market risk to which we are exposed from all business segments, excluding credit valuation adjustment (CVA), DVA and related hedges. The majority of this portfolio is within the Global Markets segment.
Table 38 presents period-end, average, high and low daily trading VaR for the three months ended September 30, 2023, June 30, 2023 and September 30, 2022 using a 99 percent confidence level as well as average daily trading VaR for the nine months ended September 30, 2023 and 2022.The amounts disclosed in Table 38 and Table 39 align to the view of covered positions used in the Basel 3 capital calculations. Foreign exchange and commodity positions are always considered covered positions, regardless of trading or banking treatment for the trade, except for structural foreign currency positions that are excluded with prior regulatory approval.
The average of total covered positions and less liquid trading positions portfolio VaR for the three months ended September 30, 2023 compared to the prior quarter remained stable.
Table 38
Market Risk VaR for Trading Activities
Three Months Ended
Nine Months Ended September 30
September 30, 2023
June 30, 2023
September 30, 2022
(Dollars in millions)
Period End
Average
High (1)
Low (1)
Period End
Average
High (1)
Low (1)
Period End
Average
High (1)
Low (1)
2023 Average
2022 Average
Foreign exchange
$
25
$
25
$
33
$
12
$
22
$
29
$
42
$
16
$
24
$
19
$
32
$
12
$
29
$
18
Interest rate
46
51
86
35
42
50
74
36
35
34
55
25
48
36
Credit
62
49
62
43
50
50
54
47
90
68
95
54
61
68
Equity
13
15
23
11
24
24
56
13
22
16
23
12
19
20
Commodities
10
8
10
6
8
9
12
7
12
13
18
9
9
13
Portfolio diversification
(90)
(92)
n/a
n/a
(85)
(98)
n/a
n/a
(102)
(85)
n/a
n/a
(104)
(88)
Total covered positions portfolio
66
56
74
41
61
64
85
53
81
65
95
42
62
67
Impact from less liquid exposures (2)
21
13
n/a
n/a
8
12
n/a
n/a
82
52
n/a
n/a
22
38
Total covered positions and less liquid trading positions portfolio
87
69
91
52
69
76
105
63
163
117
173
84
84
105
Fair value option loans
16
19
21
16
19
20
26
15
59
50
60
37
27
52
Fair value option hedges
10
11
13
9
12
16
20
12
17
16
18
13
14
17
Fair value option portfolio diversification
(14)
(17)
n/a
n/a
(19)
(24)
n/a
n/a
(39)
(36)
n/a
n/a
(24)
(35)
Total fair value option portfolio
12
13
14
12
12
12
14
11
37
30
37
23
17
34
Portfolio diversification
(2)
(5)
n/a
n/a
(6)
(7)
n/a
n/a
(5)
(4)
n/a
n/a
(7)
(13)
Total market-based portfolio
$
97
$
77
103
58
$
75
$
81
113
66
$
195
$
143
203
103
$
94
$
126
(1)The high and low for each portfolio may have occurred on different trading days than the high and low for the components. Therefore the impact from less liquid exposures and the amount of portfolio diversification, which is the difference between the total portfolio and the sum of the individual components, is not relevant.
(2)Impact is net of diversification effects between the covered positions and less liquid trading positions portfolios.
n/a = not applicable
The following graph presents the daily covered positions and less liquid trading positions portfolio VaR for the previous five quarters, corresponding to the data in Table 38.
Bank of America 44
Additional VaR statistics produced within our single VaR model are provided in Table 39 at the same level of detail as in Table 38. Evaluating VaR with additional statistics allows for an increased understanding of the risks in the portfolio, as the historical market data used in the VaR calculation does not necessarily follow a predefined statistical distribution. Table 39 presents average trading VaR statistics at 99 percent and 95 percent confidence levels for the three months ended September 30, 2023, June 30, 2023 and September 30, 2022.
Table 39
Average Market Risk VaR for Trading Activities – 99 percent and 95 percent VaR Statistics
Three Months Ended
September 30, 2023
June 30, 2023
September 30, 2022
(Dollars in millions)
99 percent
95 percent
99 percent
95 percent
99 percent
95 percent
Foreign exchange
$
25
$
16
$
29
$
19
$
19
$
11
Interest rate
51
28
50
27
34
18
Credit
49
29
50
29
68
26
Equity
15
7
24
12
16
8
Commodities
8
5
9
5
13
7
Portfolio diversification
(92)
(53)
(98)
(56)
(85)
(43)
Total covered positions portfolio
56
32
64
36
65
27
Impact from less liquid exposures
13
6
12
7
52
7
Total covered positions and less liquid trading positions portfolio
69
38
76
43
117
34
Fair value option loans
19
11
20
13
50
14
Fair value option hedges
11
7
16
10
16
10
Fair value option portfolio diversification
(17)
(11)
(24)
(15)
(36)
(13)
Total fair value option portfolio
13
7
12
8
30
11
Portfolio diversification
(5)
(4)
(7)
(6)
(4)
(7)
Total market-based portfolio
$
77
$
41
$
81
$
45
$
143
$
38
Backtesting
The accuracy of the VaR methodology is evaluated by backtesting, which compares the daily VaR results, utilizing a one-day holding period, against a comparable subset of trading revenue. For more information on our backtesting process, see Trading Risk Management – Backtesting in the MD&A of the Corporation’s 2022 Annual Report on Form 10-K.
During the three and nine months ended September 30, 2023, there were nodays where this subset of trading revenue had losses that exceeded our total covered portfolio VaR, utilizing a one-day holding period.
Total Trading-related Revenue
Total trading-related revenue, excluding brokerage fees, and CVA, DVA and funding valuation adjustment gains (losses), represents the total amount earned from trading positions, including market-based net interest income, which are taken in a diverse range of financial instruments and markets. For more information, see Trading Risk Management – Total Trading-
related Revenue in the MD&A of the Corporation’s 2022 Annual Report on Form 10-K.
The following histogram is a graphic depiction of trading volatility and illustrates the daily level of trading-related revenue for the three months ended September 30, 2023 compared to the three months ended June 30, 2023 and March 31, 2023. During the three months ended September 30, 2023, positive trading-related revenue was recorded for 100 percent of the trading days, of which 94 percent were daily trading gains of over $25 million. This compares to the three months ended June 30, 2023 where positive trading-related revenue was recorded for 100 percent of the trading days, of which 95 percent were daily trading gains of over $25 million. During the three months ended March 31, 2023, positive trading-related revenue was recorded for 100 percent of the trading days, of which 98 percent were daily trading gains of over $25 million.
45Bank of America
Trading Portfolio Stress Testing
Because the very nature of a VaR model suggests results can exceed our estimates and it is dependent on a limited historical window, we also stress test our portfolio using scenario analysis. This analysis estimates the change in the value of our trading portfolio that may result from abnormal market movements. For more information, see Trading Risk Management – Trading Portfolio Stress Testing in the MD&A of the Corporation’s 2022 Annual Report on Form 10-K.
Interest Rate Risk Management for the Banking Book
The following discussion presents net interest income for banking book activities. For more information, see Interest Rate Risk Management for the Banking Book in the MD&A of the Corporation’s 2022 Annual Report on Form 10-K.
Table 40 presents the spot and 12-month forward rates used in our baseline forecasts at September 30, 2023 and December 31, 2022.
Table 40
Forward Rates
September 30, 2023
Federal Funds
SOFR (1)
10-Year
SOFR (1)
Spot rates
5.50
%
5.31
%
4.27
%
12-month forward rates
5.14
5.01
4.13
December 31, 2022
Federal Funds
Three-month LIBOR
10-Year Swap
Spot rates
4.50
%
4.77
%
3.84
%
12-month forward rates
4.75
4.78
3.62
(1) The Corporation uses SOFR in its baseline forecast as one of the primary alternative reference rates used as a result of the cessation of LIBOR in 2023.
Table 41 shows the pretax impact to forecasted net interest income over the next 12 months from September 30, 2023 and December 31, 2022 resulting from instantaneous parallel and non-parallel shocks to the market-based forward curve. Periodically, we evaluate the scenarios presented so that they are meaningful in the context of the current rate environment. The interest rate scenarios also assume U.S. dollar interest rates are floored at zero.
During the nine months ended September 30, 2023, the overall decrease in asset sensitivity of our balance sheet to higher and lower rate scenarios was primarily due to changes in deposit product mix. We continue to be asset sensitive to a parallel upward move in interest rates with the majority of that impact coming from the short end of the yield curve. Additionally, higher interest rates negatively impact the fair value of our debt securities classified as available for sale and adversely affect accumulated OCI and thus capital levels under the Basel 3 capital rules. Under instantaneous upward parallel shifts, the near-term adverse impact to Basel 3 capital would be reduced over time by offsetting positive impacts to net interest income generated from the banking book activities. For more information on Basel 3, see Capital Management – Regulatory Capital on page 22.
Table 41
Estimated Banking Book Net Interest Income Sensitivity to Curve Changes
Short Rate (bps)
Long Rate (bps)
(Dollars in millions)
September 30 2023
December 31 2022
Parallel Shifts
+100 bps
instantaneous shift
+100
+100
$
3,057
$
3,829
-100 bps instantaneous shift
-100
-100
(3,272)
(4,591)
Flatteners
Short-end
instantaneous change
+100
—
2,949
3,698
Long-end
instantaneous change
—
-100
(126)
(157)
Steepeners
Short-end
instantaneous change
-100
—
(3,169)
(4,420)
Long-end
instantaneous change
—
+100
108
131
The sensitivity analysis in Table 41 assumes that we take no action in response to these rate shocks and does not assume any change in other macroeconomic variables normally correlated with changes in interest rates. As part of our ALM activities, we use securities, certain residential mortgages, and interest rate and foreign exchange derivatives in managing interest rate sensitivity.
Bank of America 46
The behavior of our deposit portfolio in the baseline forecast and in alternate interest rate scenarios is a key assumption in our projected estimates of net interest income. The sensitivity analysis in Table 41 assumes no change in deposit portfolio size or mix from the baseline forecast in alternate rate environments. In higher rate scenarios, the increase in net interest income would be impacted by any customer activity resulting in the replacement of low-cost or noninterest-bearing deposits with higher yielding deposits or market-based funding as our benefit in those scenarios would be reduced. Conversely, in lower-rate scenarios, any customer activity that results in the replacement of higher yielding deposits or market-based funding with low-cost or noninterest-bearing deposits would reduce our exposure in those scenarios.
For interest rate scenarios larger than 100 bps shifts, it is expected that the interest rate sensitivity will illustrate non-linear behaviors as there are numerous estimates and assumptions, which require a high degree of judgment and are often interrelated, that could impact the outcome. Pertaining to the mortgage-backed securities and residential mortgage portfolio, if long-end interest rates were to significantly decrease over the next twelve months, for example over 200 bps, there would generally be an increase in customer prepayment behaviors with an incremental reduction to net interest income, noting that the extent of changes in customer prepayment activity can be impacted by multiple factors and is not necessarily limited to long-end interest rates. Conversely, if long-end interest rates were to significantly increase over the next twelve months, for example, over 200 bps, customer prepayments would likely modestly decrease and result in an incremental increase to net interest income. In addition, deposit pricing will have non-linear impacts to larger short-end rate movements. In decreasing interest rate scenarios, and particularly where interest rates have decreased to small amounts, the ability to further reduce rates paid is reduced as customer rates near zero. In higher short-end rate scenarios, deposit pricing will likely increase at a faster rate, leading to incremental interest expense and reducing asset sensitivity. While the impact related to the above assumptions used in the asset sensitivity analysis can provide directional analysis on how net interest income will be impacted in changing environments, the ultimate impact is dependent upon the interrelationship of the assumptions and factors, which vary in different macroeconomic scenarios.
Interest Rate and Foreign Exchange Derivative Contracts
We use interest rate and foreign exchange derivative contracts in our ALM activities to manage our interest rate and foreign exchange risks. Specifically, we use those derivatives to manage both the variability in cash flows and changes in fair value of various assets and liabilities arising from those risks. Our interest rate derivative contracts are generally non-leveraged swaps tied to various benchmark interest rates and foreign exchange basis swaps, options, futures and forwards, and our foreign exchange contracts include cross-currency interest rate swaps, foreign currency futures contracts, foreign currency forward contracts and options.
The derivatives used in our ALM activities can be split into two broad categories: designated accounting hedges and other risk management derivatives. Designated accounting hedges are primarily used to manage our exposure to interest rates as described in the Interest Rate Risk Management for the Banking Book section and are included in the sensitivities presented in Table 41. The Corporation also uses foreign currency derivatives
in accounting hedges to manage substantially all of the foreign exchange risk of our foreign operations. By hedging the foreign exchange risk of our foreign operations, the Corporation's market risk exposure in this area is not significant.
Risk management derivatives are predominantly used to hedge foreign exchange risks related to various foreign currency-denominated assets and liabilities and eliminate substantially all foreign currency exposures in the cash flows of the Corporation’s non-trading foreign currency-denominated financial instruments. These foreign exchange derivatives are sensitive to other market risk exposures such as cross-currency basis spreads and interest rate risk. However, as these features are not a significant component of these foreign exchange derivatives, the market risk related to this exposure is not significant. For more information on the accounting for derivatives, see Note 3 – Derivatives to the Consolidated Financial Statements.
Mortgage Banking Risk Management
We originate, fund and service mortgage loans, which subject us to credit, liquidity and interest rate risks, among others. We determine whether loans will be held for investment or held for sale at the time of commitment and manage credit and liquidity risks by selling or securitizing a portion of the loans we originate.
Changes in interest rates impact the value of interest rate lock commitments (IRLCs) and the related residential first mortgage loans held-for-sale (LHFS), as well as the value of the MSRs. Because the interest rate risks of these hedged items offset, we combine them into one overall hedged item with one combined economic hedge portfolio consisting of derivative contracts and securities. For more information on IRLCs and the related residential mortgage LHFS, see Mortgage Banking Risk Management in the MD&A of the Corporation’s 2022 Annual Report on Form 10-K.
There were no significant gains or losses related to the change in fair value of MSRs, IRLCs and LHFS, net of gains and losses on the hedge portfolio, for the three and nine months ended September 30, 2023 and 2022. For more information on MSRs, see Note 14 – Fair Value Measurements to the Consolidated Financial Statements.
Climate Risk Management
Climate-related risks are divided into two major categories: (1) risks related to the physical impacts of climate change, driven by extreme weather events such as hurricanes and floods, as well as chronic longer-term shifts such as rising average global temperatures and sea levels, and (2) risks related to the transition to a low-carbon economy, which may entail extensive policy, legal, technology and market changes. These changes and events may have broad impacts on operations, supply chains, distribution networks, customers and markets and are otherwise referred to, respectively, as physical risk and transition risk. These risks may impact both financial and nonfinancial risk types. Physical climate events may lead to increased credit risk by diminishing borrowers’ repayment capacity or collateral value, or increased operational risk by impacting the Corporation’s facilities, employees, customers or vendors. Climate-related transition changes in policy, technology or the market may amplify credit risk through financial impacts to the Corporation or its customers or counterparties or increase market risk, including through sudden price adjustments. In addition, reputational risk may arise, including from our climate-related practices, disclosures and commitments.
47Bank of America
As climate risk spans all key risk types, we have developed and continue to enhance processes to embed climate risk considerations into our Risk Framework and risk management programs established for each of our seven key types of risk.
We publicly announced our commitment to achieve net zero emissions in our financing activities, operations, and supply chain before 2050 (Net Zero Goal). In connection with our Net Zero Goal, we set certain 2030 targets, including reducing emissions associated with our operations and financing activities, related to auto manufacturing, energy and power generation, and for our supply chain, including that a certain proportion of our global suppliers set their own climate targets (2030 Targets). We disclosed our 2019 and 2020 financed emission and emission intensity metrics for the above referenced sectors in our 2022 Task Force on Climate-related Financial Disclosures (TCFD) Report, with 2019 serving as the baseline for our financed emissions targets.
We plan to disclose the financed emissions for additional portions of our business loan portfolio in our 2023 TCFD Report, which we anticipate publishing later in 2023, and we plan to set financing activity emission reduction targets for other key sectors by April 2024.
Achieving our climate-related goals and targets, including our Net Zero Goal and 2030 Targets, may require technological advances, clearly defined roadmaps for industry sectors, new standards and public policies, including those that improve the cost of capital for the transition to a low-carbon economy and better emissions data reporting, as well as ongoing, strong and active engagement with customers, suppliers, investors, government officials and other stakeholders.
Given the extended period of these and other climate-related goals we have established, our initiatives have not resulted in a significant effect on our results of operations or financial position in the relevant periods presented herein.
For more information on our governance framework and climate risk management process, see the Managing Risk and Climate Risk Management sections in the MD&A of the Corporation’s 2022 Annual Report on Form 10-K. For more
information on climate risk, see Item 1A. Risk Factors – Other of the Corporation’s 2022 Annual Report on Form 10-K. For more information on climate-related matters and the Corporation’s climate-related goals and commitments, including our plans to achieve our Net Zero Goal and 2030 Targets and progress on our sustainable finance goals, see the Corporation’s website, including our 2022 TCFD Report and the 2022 Annual Report to shareholders available on the Investor Relations portion of our website. The contents of the Corporation’s website, including the 2022 TCFD Report and 2022 Annual Report to shareholders are not incorporated by reference into this Quarterly Report on Form 10-Q.
The foregoing discussion and our discussion in the 2022 TCFD Report and Annual Report to shareholders regarding our goals and commitments with respect to climate risk management, including environmental transition considerations, include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future results or performance and involve certain known and unknown risks, uncertainties and assumptions that are difficult to predict and are often beyond the Corporation’s control. Actual outcomes and results may differ materially from those expressed in, or implied by, any of these forward-looking statements.
Complex Accounting Estimates
Our significant accounting principles, are essential in understanding the MD&A. Many of our significant accounting principles require complex judgments to estimate the values of assets and liabilities. We have procedures and processes in place to facilitate making these judgments. For more information, see Complex Accounting Estimates in the MD&A of the Corporation’s 2022 Annual Report on Form 10-K and Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K.
Bank of America 48
Non-GAAP Reconciliations
Table 42 provides reconciliations of certain non-GAAP financial measures to the most closely related GAAP financial measures.
Table 42
Average and Period-end Supplemental Financial Data and Reconciliations to GAAP Financial Measures (1)
2023 Quarters
2022 Quarters
Nine Months Ended September 30
(Dollars in millions)
Third
Second
First
Fourth
Third
2023
2022
Reconciliation of average shareholders’ equity to average tangible shareholders’ equity and average tangible common shareholders’ equity
Shareholders’ equity
$
284,975
$
282,425
$
277,252
$
272,629
$
271,017
$
281,579
$
269,514
Goodwill
(69,021)
(69,022)
(69,022)
(69,022)
(69,022)
(69,022)
(69,022)
Intangible assets (excluding MSRs)
(2,029)
(2,049)
(2,068)
(2,088)
(2,107)
(2,049)
(2,127)
Related deferred tax liabilities
890
895
899
914
920
895
925
Tangible shareholders’ equity
$
214,815
$
212,249
$
207,061
$
202,433
$
200,808
$
211,403
$
199,290
Preferred stock
(28,397)
(28,397)
(28,397)
(28,982)
(29,134)
(28,397)
(28,094)
Tangible common shareholders’ equity
$
186,418
$
183,852
$
178,664
$
173,451
$
171,674
$
183,006
$
171,196
Reconciliation of period-end shareholders’ equity to period-end tangible shareholders’ equity and period-end tangible common shareholders’ equity
Shareholders’ equity
$
287,064
$
283,319
$
280,196
$
273,197
$
269,524
Goodwill
(69,021)
(69,021)
(69,022)
(69,022)
(69,022)
Intangible assets (excluding MSRs)
(2,016)
(2,036)
(2,055)
(2,075)
(2,094)
Related deferred tax liabilities
886
890
895
899
915
Tangible shareholders’ equity
$
216,913
$
213,152
$
210,014
$
202,999
$
199,323
Preferred stock
(28,397)
(28,397)
(28,397)
(28,397)
(29,134)
Tangible common shareholders’ equity
$
188,516
$
184,755
$
181,617
$
174,602
$
170,189
Reconciliation of period-end assets to period-end tangible assets
Assets
$
3,153,090
$
3,123,198
$
3,194,657
$
3,051,375
$
3,072,953
Goodwill
(69,021)
(69,021)
(69,022)
(69,022)
(69,022)
Intangible assets (excluding MSRs)
(2,016)
(2,036)
(2,055)
(2,075)
(2,094)
Related deferred tax liabilities
886
890
895
899
915
Tangible assets
$
3,082,939
$
3,053,031
$
3,124,475
$
2,981,177
$
3,002,752
(1)For more information on non-GAAP financial measures and ratios we use in assessing the results of the Corporation, see Supplemental Financial Data on page 7.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
See Market Risk Management on page 44 in the MD&A and the sections referenced therein for Quantitative and Qualitative Disclosures about Market Risk.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
As of the end of the period covered by this report, the Corporation’s management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness and design of the Corporation’s disclosure controls and procedures (as that term is defined in Rule 13a-15(e) of the Exchange Act). Based upon that evaluation, the Corporation’s Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures were effective, as of the end of the period covered by this report.
Changes in Internal Control Over Financial Reporting
There have been no changes in the Corporation’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the three months ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.
49Bank of America
Part I. Financial Information
Item 1. Financial Statements
Bank of America Corporation and Subsidiaries
Consolidated Statement of Income
Three Months Ended September 30
Nine Months Ended September 30
(In millions, except per share information)
2023
2022
2023
2022
Net interest income
Interest income
$
33,624
$
19,621
$
94,633
$
47,490
Interest expense
19,245
5,856
51,648
9,709
Net interest income
14,379
13,765
42,985
37,781
Noninterest income
Fees and commissions
8,135
8,001
23,990
25,477
Market making and similar activities
3,325
3,068
11,734
9,023
Other income
(672)
(332)
(2,087)
(1,863)
Total noninterest income
10,788
10,737
33,637
32,637
Total revenue, net of interest expense
25,167
24,502
76,622
70,418
Provision for credit losses
1,234
898
3,290
1,451
Noninterest expense
Compensation and benefits
9,551
8,887
28,870
27,286
Occupancy and equipment
1,795
1,777
5,370
5,285
Information processing and communications
1,676
1,546
5,017
4,621
Product delivery and transaction related
880
892
2,726
2,749
Professional fees
545
525
1,609
1,493
Marketing
501
505
1,472
1,365
Other general operating
890
1,171
3,050
3,096
Total noninterest expense
15,838
15,303
48,114
45,895
Income before income taxes
8,095
8,301
25,218
23,072
Income tax expense
293
1,219
1,847
2,676
Net income
$
7,802
$
7,082
$
23,371
$
20,396
Preferred stock dividends
532
503
1,343
1,285
Net income applicable to common shareholders
$
7,270
$
6,579
$
22,028
$
19,111
Per common share information
Earnings
$
0.91
$
0.81
$
2.74
$
2.35
Diluted earnings
0.90
0.81
2.72
2.34
Average common shares issued and outstanding
8,017.1
8,107.7
8,041.3
8,122.2
Average diluted common shares issued and outstanding
8,075.9
8,160.8
8,153.4
8,173.3
Consolidated Statement of Comprehensive Income
Three Months Ended September 30
Nine Months Ended September 30
(Dollars in millions)
2023
2022
2023
2022
Net income
$
7,802
$
7,082
$
23,371
$
20,396
Other comprehensive income (loss), net-of-tax:
Net change in debt securities
(642)
(1,112)
81
(6,381)
Net change in debit valuation adjustments
(25)
462
(419)
1,298
Net change in derivatives
(366)
(3,703)
(317)
(10,890)
Employee benefit plan adjustments
6
37
25
97
Net change in foreign currency translation adjustments
(23)
(37)
(6)
(47)
Other comprehensive income (loss)
(1,050)
(4,353)
(636)
(15,923)
Comprehensive income (loss)
$
6,752
$
2,729
$
22,735
$
4,473
See accompanying Notes to Consolidated Financial Statements.
Bank of America 50
Bank of America Corporation and Subsidiaries
Consolidated Balance Sheet
September 30 2023
December 31 2022
(Dollars in millions)
Assets
Cash and due from banks
$
25,255
$
30,334
Interest-bearing deposits with the Federal Reserve, non-U.S. central banks and other banks
326,471
199,869
Cash and cash equivalents
351,726
230,203
Time deposits placed and other short-term investments
7,995
7,259
Federal funds sold and securities borrowed or purchased under agreements to resell
(includes $170,332 and $146,999 measured at fair value)
309,249
267,574
Trading account assets (includes $154,684 and $115,505pledged as collateral)
306,409
296,108
Derivative assets
47,464
48,642
Debt securities:
Carried at fair value
175,540
229,994
Held-to-maturity, at cost (fair value $471,761 and $524,267)
603,333
632,825
Total debt securities
778,873
862,819
Loans and leases (includes $4,250and $5,771 measured at fair value)
1,049,149
1,045,747
Allowance for loan and lease losses
(13,287)
(12,682)
Loans and leases, net of allowance
1,035,862
1,033,065
Premises and equipment, net
11,821
11,510
Goodwill
69,021
69,022
Loans held-for-sale (includes $1,607 and $1,115measured at fair value)
7,591
6,871
Customer and other receivables
74,347
67,543
Other assets (includes $9,058 and $9,594measured at fair value)
152,732
150,759
Total assets
$
3,153,090
$
3,051,375
Liabilities
Deposits in U.S. offices:
Noninterest-bearing
$
549,333
$
640,745
Interest-bearing (includes $404 and $311measured at fair value)
1,228,039
1,182,590
Deposits in non-U.S. offices:
Noninterest-bearing
15,276
20,480
Interest-bearing
91,953
86,526
Total deposits
1,884,601
1,930,341
Federal funds purchased and securities loaned or sold under agreements to repurchase
(includes $209,837 and $151,708 measured at fair value)
300,703
195,635
Trading account liabilities
102,820
80,399
Derivative liabilities
40,855
44,816
Short-term borrowings (includes $4,046and $832measured at fair value)
40,196
26,932
Accrued expenses and other liabilities (includes $10,011 and $9,752measured at fair value
and $1,353 and $1,540 of reserve for unfunded lending commitments)
206,492
224,073
Long-term debt (includes $39,443 and $33,070 measured at fair value)
290,359
275,982
Total liabilities
2,866,026
2,778,178
Commitments and contingencies (Note 6 – Securitizations and Other Variable Interest Entities)
and (Note 10 – Commitments and Contingencies)
Shareholders’ equity
Preferred stock, $0.01 par value; authorized – 100,000,000shares; issued and outstanding – 4,088,099 and 4,088,101 shares
28,397
28,397
Common stock and additional paid-in capital, $0.01 par value; authorized – 12,800,000,000shares;
issued and outstanding – 7,923,357,339 and 7,996,777,943 shares
56,710
58,953
Retained earnings
223,749
207,003
Accumulated other comprehensive income (loss)
(21,792)
(21,156)
Total shareholders’ equity
287,064
273,197
Total liabilities and shareholders’ equity
$
3,153,090
$
3,051,375
Assets of consolidated variable interest entities included in total assets above (isolated to settle the liabilities of the variable interest entities)
Trading account assets
$
4,654
$
2,816
Loans and leases
16,902
16,738
Allowance for loan and lease losses
(809)
(797)
Loans and leases, net of allowance
16,093
15,941
All other assets
222
116
Total assets of consolidated variable interest entities
$
20,969
$
18,873
Liabilities of consolidated variable interest entities included in total liabilities above
Short-term borrowings (includes $23 and $42 of non-recourse short-term borrowings)
$
2,059
$
42
Long-term debt (includes $6,566and $4,581 of non-recourse debt)
6,566
4,581
All other liabilities (includes $12 and $13 of non-recourse liabilities)
12
12
Total liabilities of consolidated variable interest entities
$
8,637
$
4,635
See accompanying Notes to Consolidated Financial Statements.
51Bank of America
Bank of America Corporation and Subsidiaries
Consolidated Statement of Changes in Shareholders’ Equity
Preferred Stock
Common Stock and Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Total Shareholders’ Equity
(In millions)
Shares
Amount
Balance, June 30, 2023
$
28,397
7,953.6
$
57,267
$
218,397
$
(20,742)
$
283,319
Net income
7,802
7,802
Net change in debt securities
(642)
(642)
Net change in debit valuation adjustments
(25)
(25)
Net change in derivatives
(366)
(366)
Employee benefit plan adjustments
6
6
Net change in foreign currency translation adjustments
(23)
(23)
Dividends declared:
Common
(1,919)
(1,919)
Preferred
(531)
(531)
Common stock issued under employee plans, net, and other
2.3
443
443
Common stock repurchased
(32.5)
(1,000)
(1,000)
Balance, September 30, 2023
$
28,397
7,923.4
$
56,710
$
223,749
$
(21,792)
$
287,064
Balance, December 31, 2022
$
28,397
7,996.8
$
58,953
$
207,003
$
(21,156)
$
273,197
Cumulative adjustment for adoption of credit loss accounting standard
184
184
Net income
23,371
23,371
Net change in debt securities
81
81
Net change in debit valuation adjustments
(419)
(419)
Net change in derivatives
(317)
(317)
Employee benefit plan adjustments
25
25
Net change in foreign currency translation adjustments
(6)
(6)
Dividends declared:
Common
(5,459)
(5,459)
Preferred
(1,343)
(1,343)
Common stock issued under employee plans, net, and other
45.1
1,522
(7)
1,515
Common stock repurchased
(118.5)
(3,765)
(3,765)
Balance, September 30, 2023
$
28,397
7,923.4
$
56,710
$
223,749
$
(21,792)
$
287,064
Balance, June 30, 2022
$
29,134
8,035.2
$
59,499
$
197,159
$
(16,674)
$
269,118
Net income
7,082
7,082
Net change in debt securities
(1,112)
(1,112)
Net change in debit valuation adjustments
462
462
Net change in derivatives
(3,703)
(3,703)
Employee benefit plan adjustments
37
37
Net change in foreign currency translation adjustments
(37)
(37)
Dividends declared:
Common
(1,780)
(1,780)
Preferred
(503)
(503)
Common stock issued under employee plans, net, and other
2.5
411
(1)
410
Common stock repurchased
(13.2)
(450)
(450)
Balance, September 30, 2022
$
29,134
8,024.5
$
59,460
$
201,957
$
(21,027)
$
269,524
Balance, December 31, 2021
$
24,708
8,077.8
$
62,398
$
188,064
$
(5,104)
$
270,066
Net income
20,396
20,396
Net change in debt securities
(6,381)
(6,381)
Net change in debit valuation adjustments
1,298
1,298
Net change in derivatives
(10,890)
(10,890)
Employee benefit plan adjustments
97
97
Net change in foreign currency translation adjustments
(47)
(47)
Dividends declared:
Common
(5,188)
(5,188)
Preferred
(1,285)
(1,285)
Issuance of preferred stock
4,426
4,426
Common stock issued under employee plans, net, and other
44.5
1,137
(30)
1,107
Common stock repurchased
(97.8)
(4,075)
(4,075)
Balance, September 30, 2022
$
29,134
8,024.5
$
59,460
$
201,957
$
(21,027)
$
269,524
See accompanying Notes to Consolidated Financial Statements.
Bank of America 52
Bank of America Corporation and Subsidiaries
Consolidated Statement of Cash Flows
Nine Months Ended September 30
(Dollars in millions)
2023
2022
Operating activities
Net income
$
23,371
$
20,396
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses
3,290
1,451
(Gains) losses on sales of debt securities
404
(37)
Depreciation and amortization
1,530
1,476
Net amortization of premium/discount on debt securities
155
1,862
Deferred income taxes
(1,440)
620
Stock-based compensation
2,214
2,235
Loans held-for-sale:
Originations and purchases
(11,545)
(18,736)
Proceeds from sales and paydowns of loans originally classified as held for sale and instruments
from related securitization activities
10,716
27,260
Net change in:
Trading and derivative assets/liabilities
4,681
(106,322)
Other assets
(6,887)
7,623
Accrued expenses and other liabilities
(18,086)
23,869
Other operating activities, net
3,855
978
Net cash provided by (used in) operating activities
12,258
(37,325)
Investing activities
Net change in:
Time deposits placed and other short-term investments
(736)
(305)
Federal funds sold and securities borrowed or purchased under agreements to resell
(41,675)
(24,527)
Debt securities carried at fair value:
Proceeds from sales
94,080
58,888
Proceeds from paydowns and maturities
50,008
90,161
Purchases
(90,855)
(114,027)
Held-to-maturity debt securities:
Proceeds from paydowns and maturities
28,517
53,340
Purchases
(98)
(24,059)
Loans and leases:
Proceeds from sales of loans originally classified as held for investment and instruments
from related securitization activities
7,734
20,544
Purchases
(3,935)
(4,618)
Other changes in loans and leases, net
(9,973)
(69,267)
Other investing activities, net
(4,271)
(3,039)
Net cash provided by (used in) investing activities
28,796
(16,909)
Financing activities
Net change in:
Deposits
(45,740)
(126,434)
Federal funds purchased and securities loaned or sold under agreements to repurchase
105,068
23,298
Short-term borrowings
13,264
(2,709)
Long-term debt:
Proceeds from issuance
52,955
55,202
Retirement
(32,167)
(24,390)
Preferred stock:
Proceeds from issuance
—
4,426
Common stock repurchased
(3,765)
(4,075)
Cash dividends paid
(6,854)
(6,471)
Other financing activities, net
(707)
(501)
Net cash provided by (used in) financing activities
82,054
(81,654)
Effect of exchange rate changes on cash and cash equivalents
(1,585)
(7,357)
Net increase (decrease) in cash and cash equivalents
121,523
(143,245)
Cash and cash equivalents at January 1
230,203
348,221
Cash and cash equivalents at September 30
$
351,726
$
204,976
See accompanying Notes to Consolidated Financial Statements.
53Bank of America
Bank of America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
NOTE 1 Summary of Significant Accounting Principles
Bank of America Corporation, a bank holding company and a financial holding company, provides a diverse range of financial services and products throughout the U.S. and in certain international markets. The term “the Corporation” as used herein may refer to Bank of America Corporation, individually, Bank of America Corporation and its subsidiaries, or certain of Bank of America Corporation’s subsidiaries or affiliates.
Principles of Consolidation and Basis of Presentation
The Consolidated Financial Statements include the accounts of the Corporation and its majority-owned subsidiaries and those variable interest entities (VIEs) where the Corporation is the primary beneficiary. Intercompany accounts and transactions have been eliminated. Results of operations of acquired companies are included from the dates of acquisition, and for VIEs, from the dates that the Corporation became the primary beneficiary. Assets held in an agency or fiduciary capacity are not included in the Consolidated Financial Statements. The Corporation accounts for investments in companies for which it owns a voting interest and for which it has the ability to exercise significant influence over operating and financing decisions using the equity method of accounting. These investments, which include the Corporation’s interests in affordable housing and renewable energy partnerships, are recorded in other assets. Equity method investments are subject to impairment testing, and the Corporation’s proportionate share of income or loss is included in other income.
The preparation of the Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could materially differ from those estimates and assumptions.
These unaudited Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements, and related notes thereto, of the Corporation’s 2022 Annual Report on Form 10-K.
The nature of the Corporation’s business is such that the results of any interim period are not necessarily indicative of results for a full year. In the opinion of management, all adjustments, which consist of normal recurring adjustments necessary for a fair statement of the interim period results, have been made. The Corporation evaluates subsequent events through the date of filing with the Securities and Exchange Commission (SEC). Certain prior-period amounts have been reclassified to conform to current-period presentation.
New Accounting Standard Issued
Investments – Equity Method and Joint Ventures
The FASB updated its guidance on the accounting for tax credit investments, which permits entities to make an accounting
policy election to apply the proportional amortization method when certain conditions are met. The new accounting guidance is effective on a retrospective or modified retrospective basis beginning on January 1, 2024, with early adoption permitted. If adopted, the Corporation does not expect the guidance to have a material impact on its consolidated financial position or results of operations.
New Accounting Standard Adopted
Financial Instruments – Credit Losses
On January 1, 2023, the Corporation adopted the new accounting and disclosure requirements for expected credit losses (ECL) that removed the recognition and measurement guidance on troubled debt restructurings (TDRs) and added disclosures on the financial effect and subsequent performance of certain types of modifications made to borrowers experiencing financial difficulties.
Upon adoption of the standard, the Corporation recorded a reduction of $243 million in the allowance for credit losses for the impact of changes in the methodology used to estimate the allowance for credit losses for non-collateral dependent consumer and commercial TDRs. There was no impact to the valuation of loans previously classified as collateral-dependent TDRs. After adjusting for deferred taxes, the Corporation recorded an increase of $184 million in retained earnings through a cumulative-effect adjustment.
The additional disclosures are included in Note 5 – Outstanding Loans and Leases and Allowance for Credit Losses on a prospective basis and include loan modifications where the contractual payment terms of the borrower’s loan agreement were modified through a refinancing or restructuring. Modifications that do not impact the contractual payment terms, such as covenant waivers, insignificant payment deferrals, and any modifications made to loans carried at fair value, loans held-for-sale (LHFS) and leases are not included in the disclosures.
The Corporation uses various indicators to identify borrowers in financial difficulty. Consumer loan borrowers that are delinquent and commercial loan borrowers that are rated substandard or worse are the primary criteria used to identify borrowers who are experiencing financial difficulty.
If a borrower is current at the time of modification, the loan generally remains a performing loan as long as there is demonstrated performance prior to the modification, and payment in full under the modified terms is expected. Otherwise, the loan is placed on nonaccrual status and reported as nonperforming, excluding fully-insured consumer real estate loans, until there is sustained repayment performance for a reasonable period.
The allowance for loan and lease losses for modified loans is determined in a manner consistent with the methodology for the respective class and credit rating of the financing receivable as described in Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K.
Bank of America 54
NOTE 2 Net Interest Income and Noninterest Income
The table below presents the Corporation’s net interest income and noninterest income disaggregated by revenue source for the three and nine months ended September 30, 2023 and 2022. For more information, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K. For a disaggregation of noninterest income by business segment and All Other, see Note 17 – Business Segment Information.
Three Months Ended September 30
Nine Months Ended September 30
(Dollars in millions)
2023
2022
2023
2022
Net interest income
Interest income
Loans and leases
$
14,830
$
10,231
$
41,897
$
25,805
Debt securities
4,658
4,239
14,809
12,111
Federal funds sold and securities borrowed or purchased under agreements to resell
4,888
1,446
13,555
1,835
Trading account assets
2,217
1,449
6,321
3,753
Other interest income
7,031
2,256
18,051
3,986
Total interest income
33,624
19,621
94,633
47,490
Interest expense
Deposits
7,340
1,235
17,439
1,719
Short-term borrowings
7,629
2,264
22,164
2,705
Trading account liabilities
510
383
1,486
1,117
Long-term debt
3,766
1,974
10,559
4,168
Total interest expense
19,245
5,856
51,648
9,709
Net interest income
$
14,379
$
13,765
$
42,985
$
37,781
Noninterest income
Fees and commissions
Card income
Interchange fees (1)
$
994
$
1,060
$
2,973
$
3,067
Other card income
526
513
1,562
1,464
Total card income
1,520
1,573
4,535
4,531
Service charges
Deposit-related fees
1,124
1,162
3,266
4,109
Lending-related fees
340
304
972
907
Total service charges
1,464
1,466
4,238
5,016
Investment and brokerage services
Asset management fees
3,103
2,920
8,990
9,308
Brokerage fees
860
875
2,664
2,870
Total investment and brokerage services
3,963
3,795
11,654
12,178
Investment banking fees
Underwriting income
531
452
1,757
1,559
Syndication fees
209
283
620
896
Financial advisory services
448
432
1,186
1,297
Total investment banking fees
1,188
1,167
3,563
3,752
Total fees and commissions
8,135
8,001
23,990
25,477
Market making and similar activities
3,325
3,068
11,734
9,023
Other income (loss)
(672)
(332)
(2,087)
(1,863)
Total noninterest income
$
10,788
$
10,737
$
33,637
$
32,637
(1)Gross interchange fees and merchant income are $3.4 billion and $3.3 billion for the three months ended September 30, 2023 and 2022 and are presented net of $2.4 billion and $2.2 billion of expenses for rewards and partner payments as well as certain other card costs for the same periods. Gross interchange fees and merchant income were $9.9 billion and $9.5 billion for the nine months ended September 30, 2023 and 2022 and are presented net of $7.0 billion and $6.4 billion of expenses for rewards and partner payments as well as certain other card costs for the same periods.
55Bank of America
NOTE 3 Derivatives
Derivative Balances
Derivatives are entered into on behalf of customers, for trading or to support risk management activities. Derivatives used in risk management activities include derivatives that may or may not be designated in qualifying hedge accounting relationships. Derivatives that are not designated in qualifying hedge accounting relationships are referred to as other risk management derivatives. For more information on the Corporation’s derivatives and hedging activities, see Note 1 – Summary of Significant Accounting Principles and Note 3 –
Derivatives to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K. The following tables present derivative instruments included on the Consolidated Balance Sheet in derivative assets and liabilities at September 30, 2023 and December 31, 2022. Balances are presented on a gross basis, prior to the application of counterparty and cash collateral netting. Total derivative assets and liabilities are adjusted on an aggregate basis to take into consideration the effects of legally enforceable master netting agreements and have been reduced by cash collateral received or paid.
(1)Represents the total contract/notional amount of derivative assets and liabilities outstanding.
(2)Includes certain out-of-the-money purchased options that have a liability amount primarily due to the deferral of option premiums to the end of the contract.
(3)Includes certain out-of-the-money written options that have an asset amount primarily due to the deferral of option premiums to the end of the contract.
(4)The net derivative asset (liability) and notional amount of written credit derivatives for which the Corporation held purchased credit derivatives with identical underlying referenced names were $(420) million and $366.1 billion at September 30, 2023.
(1)Represents the total contract/notional amount of derivative assets and liabilities outstanding.
(2)Includes certain out-of-the-money purchased options that have a liability amount primarily due to the deferral of option premiums to the end of the contract.
(3)Includes certain out-of-the-money written options that have an asset amount primarily due to the deferral of option premiums to the end of the contract.
(4)The net derivative asset (liability) and notional amount of written credit derivatives for which the Corporation held purchased credit derivatives with identical underlying referenced names were $(1.2) billion and $276.9 billion at December 31, 2022.
Offsetting of Derivatives
The Corporation enters into International Swaps and Derivatives Association, Inc. (ISDA) master netting agreements or similar agreements with substantially all of the Corporation’s derivative counterparties. For more information, see Note 3 – Derivatives to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K.
The following table presents derivative instruments included in derivative assets and liabilities on the Consolidated Balance Sheet at September 30, 2023 and December 31, 2022 by primary risk (e.g., interest rate risk) and the platform, where
applicable, on which these derivatives are transacted. Balances are presented on a gross basis, prior to the application of counterparty and cash collateral netting. Total gross derivative assets and liabilities are adjusted on an aggregate basis to take into consideration the effects of legally enforceable master netting agreements, which include reducing the balance for counterparty netting and cash collateral received or paid.
For more information on offsetting of securities financing agreements, see Note 9 – Securities Financing Agreements, Collateral and Restricted Cash.
57Bank of America
Offsetting of Derivatives (1)
Derivative Assets
Derivative Liabilities
Derivative Assets
Derivative Liabilities
(Dollars in billions)
September 30, 2023
December 31, 2022
Interest rate contracts
Over-the-counter
$
135.6
$
127.9
$
138.4
$
132.3
Exchange-traded
0.4
0.2
0.4
0.1
Over-the-counter cleared
75.3
75.5
71.4
71.1
Foreign exchange contracts
Over-the-counter
97.8
92.5
109.7
110.6
Over-the-counter cleared
0.9
0.9
1.3
1.2
Equity contracts
Over-the-counter
23.9
27.3
21.5
22.6
Exchange-traded
32.6
34.0
33.0
33.8
Commodity contracts
Over-the-counter
6.8
8.0
8.3
9.3
Exchange-traded
2.4
2.4
2.4
1.9
Over-the-counter cleared
0.4
0.5
0.3
0.3
Credit derivatives
Over-the-counter
6.7
5.2
8.9
7.5
Total gross derivative assets/liabilities, before netting
Over-the-counter
270.8
260.9
286.8
282.3
Exchange-traded
35.4
36.6
35.8
35.8
Over-the-counter cleared
76.6
76.9
73.0
72.6
Less: Legally enforceable master netting agreements and cash collateral received/paid
Over-the-counter
(228.9)
(229.4)
(243.8)
(248.2)
Exchange-traded
(34.5)
(34.5)
(33.5)
(33.5)
Over-the-counter cleared
(75.2)
(75.6)
(72.4)
(72.0)
Derivative assets/liabilities, after netting
44.2
34.9
45.9
37.0
Other gross derivative assets/liabilities (2)
3.3
6.0
2.7
7.8
Total derivative assets/liabilities
47.5
40.9
48.6
44.8
Less: Financial instruments collateral (3)
(18.5)
(9.9)
(18.5)
(7.4)
Total net derivative assets/liabilities
$
29.0
$
31.0
$
30.1
$
37.4
(1)Over-the-counter derivatives include bilateral transactions between the Corporation and a particular counterparty. Over-the-counter cleared derivatives include bilateral transactions between the Corporation and a counterparty where the transaction is cleared through a clearinghouse. Exchange-traded derivatives include listed options transacted on an exchange.
(2)Consists of derivatives entered into under master netting agreements where the enforceability of these agreements is uncertain under bankruptcy laws in some countries or industries.
(3)Amounts are limited to the derivative asset/liability balance and, accordingly, do not include excess collateral received/pledged. Financial instruments collateral includes securities collateral received or pledged and cash securities held and posted at third-party custodians that are not offset on the Consolidated Balance Sheet but shown as a reduction to derive net derivative assets and liabilities.
Derivatives Designated as Accounting Hedges
The Corporation uses various types of interest rate and foreign exchange derivative contracts to protect against changes in the fair value of its assets and liabilities due to fluctuations in interest rates and foreign exchange rates (fair value hedges). The Corporation also uses these types of contracts to protect
against changes in the cash flows of its assets and liabilities, and other forecasted transactions (cash flow hedges). The Corporation hedges its net investment in consolidated non-U.S. operations determined to have functional currencies other than the U.S. dollar using forward exchange contracts and cross-currency basis swaps, and by issuing foreign currency- denominated debt (net investment hedges).
Bank of America 58
Fair Value Hedges
The table below summarizes information related to fair value hedges for the three and nine months ended September 30, 2023 and 2022.
Gains and Losses on Derivatives Designated as Fair Value Hedges
Three Months Ended September 30, 2023
Three Months Ended September 30, 2022
(Dollars in millions)
Derivative
Hedged Item
Derivative
Hedged Item
Interest rate risk on long-term debt (1)
$
(4,339)
$
4,299
$
(8,435)
$
8,437
Interest rate and foreign currency risk (2)
114
(113)
(77)
78
Interest rate risk on available-for-sale securities (3)
1,934
(1,927)
8,675
(8,769)
Price risk on commodity inventory (4)
410
(410)
1,006
(938)
Total
$
(1,881)
$
1,849
$
1,169
$
(1,192)
`
Nine Months Ended September 30, 2023
Nine Months Ended September 30, 2022
Derivative
Hedged Item
Derivative
Hedged Item
Interest rate risk on long-term debt (1)
$
(4,581)
$
4,510
$
(27,458)
$
27,630
Interest rate and foreign currency risk (2)
229
(225)
(137)
137
Interest rate risk on available-for-sale securities (3)
787
(795)
23,442
(23,705)
Price risk on commodity inventory (4)
582
(582)
1,374
(1,270)
Total
$
(2,983)
$
2,908
$
(2,779)
$
2,792
(1)Amounts are recorded in interest expense in the Consolidated Statement of Income.
(2)Represents cross-currency interest rate swaps related to available-for-sale debt securities and long-term debt. For the three and nine months ended September 30, 2023, the derivative amount includes gains (losses) of $21 million and $22 million in interest income, $2 million and $9 million in interest expense, $90 million and $195 million in market making and similar activities, and $1 million and $3 million in accumulated other comprehensive income (OCI). For the same periods in 2022, the derivative amount includes gains (losses) of $(6) million and $(40) million in interest expense, $(71) million and $(96) million in market making and similar activities, and $0 and $(1) million in accumulated OCI. Line item totals are in the Consolidated Statement of Income and on the Consolidated Balance Sheet.
(3)Amounts are recorded in interest income in the Consolidated Statement of Income.
(4)Amounts are recorded in market making and similar activities in the Consolidated Statement of Income.
The table below summarizes the carrying value of hedged assets and liabilities that are designated and qualifying in fair value hedging relationships along with the cumulative amount of fair value hedging adjustments included in the carrying value that have been recorded in the current hedging relationships. These fair value hedging adjustments are open basis adjustments that are not subject to amortization as long as the hedging relationship remains designated.
Designated Fair Value Hedged Assets and Liabilities
September 30, 2023
December 31, 2022
(Dollars in millions)
Carrying Value
Cumulative
Fair Value
Adjustments (1)
Carrying Value
Cumulative
Fair Value
Adjustments (1)
Long-term debt (2)
$
194,138
$
(14,154)
$
187,402
$
(21,372)
Available-for-sale debt securities (2, 3, 4)
86,730
(6,262)
167,518
(18,190)
Trading account assets (5)
7,452
205
16,119
146
(1)Increase (decrease) to carrying value.
(2)At September 30, 2023 and December 31, 2022, the cumulative fair value adjustments remaining on long-term debt and available-for-sale debt securities from discontinued hedging relationships resulted in a decrease of $10.7 billion and an increase of $137 million in the related liability and a decrease in the related asset of $5.6 billion and $4.9 billion, which are being amortized over the remaining contractual life of the de-designated hedged items.
(3)These amounts include the amortized cost of the financial assets in closed portfolios used to designate hedging relationships in which the hedged item is a stated layer that is expected to be remaining at the end of the hedging relationship (i.e. portfolio layer hedging relationship). At September 30, 2023 and December 31, 2022, the amortized cost of the closed portfolios used in these hedging relationships was $21.3 billion and $21.4 billion, of which $17.3 billion and $9.2 billion were designated in a portfolio layer hedging relationship. At September 30, 2023 and December 31, 2022, the cumulative adjustment associated with these hedging relationships was a decrease of $741 million and $451 million.
(4)Carrying value represents amortized cost.
(5)Represents hedging activities related to certain commodities inventory.
Cash Flow and Net Investment Hedges
The following table summarizes certain information related to cash flow hedges and net investment hedges for the three and nine months ended September 30, 2023 and 2022. Of the $12.3 billion after-tax net loss ($16.3 billion pretax) on derivatives in accumulated OCI at September 30, 2023, losses of $4.7 billion after-tax ($6.2 billion pretax) related to both open and terminated cash flow hedges are expected to be reclassified into earnings in the next 12 months. These net
losses reclassified into earnings are expected to primarily decrease net interest income related to the respective hedged items. For open cash flow hedges, the maximum length of time over which forecasted transactions are hedged is approximately ten years. For terminated cash flow hedges, the time period over which the forecasted transactions will be recognized in interest income is approximately five years, with the aggregated amount beyond this time period being insignificant.
59Bank of America
Gains and Losses on Derivatives Designated as Cash Flow and Net Investment Hedges
Gains (Losses) Recognized in Accumulated OCI on Derivatives
Gains (Losses) in Income Reclassified from Accumulated OCI
Gains (Losses) Recognized in Accumulated OCI on Derivatives
Gains (Losses) in Income Reclassified from Accumulated OCI
(Dollars in millions, amounts pretax)
Three Months Ended September 30, 2023
Nine Months Ended September 30, 2023
Cash flow hedges
Interest rate risk on variable-rate portfolios (1)
$
(737)
$
(263)
$
(1,065)
$
(612)
Price risk on forecasted MBS purchases (1)
2
—
6
—
Price risk on certain compensation plans (2)
(8)
7
28
18
Total
$
(743)
$
(256)
$
(1,031)
$
(594)
Net investment hedges
Foreign exchange risk (3)
$
802
$
133
$
334
$
136
Three Months Ended September 30, 2022
Nine Months Ended September 30, 2022
Cash flow hedges
Interest rate risk on variable-rate portfolios (1)
$
(5,045)
$
(110)
$
(14,443)
$
(191)
Price risk on forecasted MBS purchases (1)
—
—
(129)
13
Price risk on certain compensation plans (2)
(13)
5
(107)
24
Total
$
(5,058)
$
(105)
$
(14,679)
$
(154)
Net investment hedges
Foreign exchange risk (3)
$
1,541
$
3
$
3,339
$
3
(1)Amounts reclassified from accumulated OCI are recorded in interest income in the Consolidated Statement of Income.
(2)Amounts reclassified from accumulated OCI are recorded in compensation and benefits expense in the Consolidated Statement of Income.
(3)Amounts reclassified from accumulated OCI are recorded in other income in the Consolidated Statement of Income. For the three and nine months ended September 30, 2023, amounts excluded from effectiveness testing and recognized in market making and similar activities were gains of $36 million and $145 million. For the same periods in 2022 amounts excluded from effectiveness testing and recognized in market making and similar activities were gains of $38 million and losses of $109 million.
Other Risk Management Derivatives
Other risk management derivatives are used by the Corporation to reduce certain risk exposures by economically hedging various assets and liabilities. The table below presents gains (losses) on these derivatives for the three and nine months ended September 30, 2023 and 2022. These gains (losses) are largely offset by the income or expense recorded on the hedged item.
Gains and Losses on Other Risk Management Derivatives
Three Months Ended September 30
Nine Months Ended September 30
(Dollars in millions)
2023
2022
2023
2022
Interest rate risk on mortgage activities (1, 2)
$
(54)
$
(64)
$
(51)
$
(321)
Credit risk on loans (2)
(7)
(30)
(47)
(17)
Interest rate and foreign currency risk on asset and liability management activities (3)
381
1,591
1,040
7,204
Price risk on certain compensation plans (4)
(199)
(192)
184
(1,283)
(1)Includes hedges of interest rate risk on mortgage servicing rights (MSRs) and interest rate lock commitments (IRLCs) to originate mortgage loans that will be held for sale.
(2)Gains (losses) on these derivatives are recorded in other income.
(3)Gains (losses) on these derivatives are recorded in market making and similar activities.
(4)Gains (losses) on these derivatives are recorded in compensation and benefits expense.
Transfers of Financial Assets with Risk Retained through Derivatives
The Corporation enters into certain transactions involving the transfer of financial assets that are accounted for as sales where substantially all of the economic exposure to the transferred financial assets is retained through derivatives (e.g., interest rate and/or credit), but the Corporation does not retain control over the assets transferred. At September 30, 2023 and December 31, 2022, the Corporation had transferred $4.3 billion and $4.8 billion of non-U.S. government-guaranteed mortgage-backed securities to a third-party trust and retained economic exposure to the transferred assets through derivative contracts. In connection with these transfers, the Corporation received gross cash proceeds of $4.3 billion and $4.9 billion at the transfer dates. At September 30, 2023 and December 31, 2022, the fair value of the transferred securities was $4.2 billion and $4.7 billion.
Sales and Trading Revenue
The Corporation enters into trading derivatives to facilitate client transactions and to manage risk exposures arising from trading
account assets and liabilities. It is the Corporation’s policy to include these derivative instruments in its trading activities, which include derivatives and non-derivative cash instruments. The resulting risk from these derivatives is managed on a portfolio basis as part of the Corporation’s Global Markets business segment. For more information on sales and trading revenue, see Note 3 – Derivatives to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K.
The following table, which includes both derivatives and non-derivative cash instruments, identifies the amounts in the respective income statement line items attributable to the Corporation’s sales and trading revenue in Global Markets, categorized by primary risk, for the three and nine months ended September 30, 2023 and 2022. This table includes debit valuation adjustment (DVA) and funding valuation adjustment (FVA) gains (losses). Global Markets results in Note 17 – Business Segment Information are presented on a fully taxable-equivalent (FTE) basis. The following table is not presented on an FTE basis.
Bank of America 60
Sales and Trading Revenue
Market making and similar activities
Net Interest Income
Other (1)
Total
Market making and similar activities
Net Interest Income
Other (1)
Total
(Dollars in millions)
Three Months Ended September 30, 2023
Nine Months Ended September 30, 2023
Interest rate risk
$
815
$
80
$
90
$
985
$
2,867
$
218
$
301
$
3,386
Foreign exchange risk
446
32
17
495
1,355
113
55
1,523
Equity risk
1,458
(218)
426
1,666
5,116
(1,566)
1,345
4,895
Credit risk
349
590
93
1,032
1,140
1,865
303
3,308
Other risk (2)
126
(11)
3
118
521
(153)
(8)
360
Total sales and trading revenue
$
3,194
$
473
$
629
$
4,296
$
10,999
$
477
$
1,996
$
13,472
Three Months Ended September 30, 2022
Nine Months Ended September 30, 2022
Interest rate risk
$
372
$
432
$
140
$
944
$
1,452
$
1,381
$
291
$
3,124
Foreign exchange risk
552
13
(54)
511
1,562
(13)
(51)
1,498
Equity risk
1,532
(399)
416
1,549
4,474
(694)
1,404
5,184
Credit risk
252
544
114
910
561
1,559
176
2,296
Other risk (2)
165
(62)
17
120
670
(138)
77
609
Total sales and trading revenue
$
2,873
$
528
$
633
$
4,034
$
8,719
$
2,095
$
1,897
$
12,711
(1)Represents amounts in investment and brokerage services and other income that are recorded in Global Markets and included in the definition of sales and trading revenue. Includes investment and brokerage services revenue of $474 million and $1.5 billion for the three and nine months ended September 30, 2023 compared to $444 million and $1.5 billion for the same periods in 2022.
(2)Includes commodity risk.
Credit Derivatives
The Corporation enters into credit derivatives primarily to facilitate client transactions and to manage credit risk exposures. Credit derivatives are classified as investment and non-investment grade based on the credit quality of the underlying referenced obligation. The Corporation considers ratings of BBB- or higher as investment grade. Non-investment
grade includes non-rated credit derivative instruments. The Corporation discloses internal categorizations of investment grade and non-investment grade consistent with how risk is managed for these instruments. For more information on credit derivatives, see Note 3 – Derivatives to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K.
61Bank of America
Credit derivative instruments where the Corporation is the seller of credit protection and their expiration at September 30, 2023 and December 31, 2022 are summarized in the table below.
Credit Derivative Instruments
Less than One Year
One to Three Years
Three to Five Years
Over Five Years
Total
September 30, 2023
(Dollars in millions)
Carrying Value
Credit default swaps:
Investment grade
$
—
$
8
$
69
$
44
$
121
Non-investment grade
19
286
778
793
1,876
Total
19
294
847
837
1,997
Total return swaps/options:
Investment grade
21
118
—
—
139
Non-investment grade
106
199
93
10
408
Total
127
317
93
10
547
Total credit derivatives
$
146
$
611
$
940
$
847
$
2,544
Credit-related notes:
Investment grade
$
—
$
—
$
1
$
745
$
746
Non-investment grade
—
4
6
1,128
1,138
Total credit-related notes
$
—
$
4
$
7
$
1,873
$
1,884
Maximum Payout/Notional
Credit default swaps:
Investment grade
$
32,425
$
63,851
$
139,008
$
47,781
$
283,065
Non-investment grade
15,441
32,430
41,234
14,069
103,174
Total
47,866
96,281
180,242
61,850
386,239
Total return swaps/options:
Investment grade
25,097
12,709
1,598
105
39,509
Non-investment grade
15,600
3,255
2,387
939
22,181
Total
40,697
15,964
3,985
1,044
61,690
Total credit derivatives
$
88,563
$
112,245
$
184,227
$
62,894
$
447,929
December 31, 2022
Carrying Value
Credit default swaps:
Investment grade
$
2
$
25
$
133
$
34
$
194
Non-investment grade
120
516
870
697
2,203
Total
122
541
1,003
731
2,397
Total return swaps/options:
Investment grade
55
336
—
—
391
Non-investment grade
332
9
132
10
483
Total
387
345
132
10
874
Total credit derivatives
$
509
$
886
$
1,135
$
741
$
3,271
Credit-related notes:
Investment grade
$
—
$
—
$
19
$
1,017
$
1,036
Non-investment grade
—
7
6
1,035
1,048
Total credit-related notes
$
—
$
7
$
25
$
2,052
$
2,084
Maximum Payout/Notional
Credit default swaps:
Investment grade
$
34,670
$
66,170
$
93,237
$
18,677
$
212,754
Non-investment grade
15,229
29,629
30,891
6,662
82,411
Total
49,899
95,799
124,128
25,339
295,165
Total return swaps/options:
Investment grade
38,722
10,407
—
—
49,129
Non-investment grade
32,764
500
2,054
897
36,215
Total
71,486
10,907
2,054
897
85,344
Total credit derivatives
$
121,385
$
106,706
$
126,182
$
26,236
$
380,509
The notional amount represents the maximum amount payable by the Corporation for most credit derivatives. However, the Corporation does not monitor its exposure to credit derivatives based solely on the notional amount because this measure does not take into consideration the probability of occurrence. As such, the notional amount is not a reliable indicator of the Corporation’s exposure to these contracts. Instead, a risk framework is used to define risk tolerances and establish limits so that certain credit risk-related losses occur within acceptable, predefined limits.
Credit-related notes in the table above include investments in securities issued by collateralized debt obligation (CDO), collateralized loan obligation (CLO) and credit-linked note vehicles. These instruments are primarily classified as trading securities. The carrying value of these instruments equals the Corporation’s maximum exposure to loss. The Corporation is not obligated to make any payments to the entities under the terms of the securities owned.
Bank of America 62
Credit-related Contingent Features and Collateral
Certain of the Corporation’s derivative contracts contain credit risk-related contingent features, primarily in the form of ISDA master netting agreements and credit support documentation that enhance the creditworthiness of these instruments compared to other obligations of the respective counterparty with whom the Corporation has transacted. These contingent features may be for the benefit of the Corporation as well as its counterparties with respect to changes in the Corporation’s creditworthiness and the mark-to-market exposure under the derivative transactions. At September 30, 2023 and December 31, 2022, the Corporation held cash and securities collateral of $104.6 billion and $101.3 billion and posted cash and securities collateral of $84.1 billion and $81.2 billion in the normal course of business under derivative agreements, excluding cross-product margining agreements where clients are permitted to margin on a net basis for both derivative and secured financing arrangements.
In connection with certain OTC derivative contracts and other trading agreements, the Corporation can be required to provide additional collateral or to terminate transactions with certain counterparties in the event of a downgrade of the senior debt ratings of the Corporation or certain subsidiaries. The amount of additional collateral required depends on the contract and is usually a fixed incremental amount and/or the market value of the exposure. For more information on credit-related contingent features and collateral, see Note 3 – Derivatives to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K.
At September 30, 2023, the amount of collateral, calculated based on the terms of the contracts, that the Corporation and certain subsidiaries could be required to post to counterparties but had not yet posted to counterparties was $2.9 billion, including $1.5 billion for Bank of America, National Association (BANA).
Some counterparties are currently able to unilaterally terminate certain contracts, or the Corporation or certain subsidiaries may be required to take other action such as find a suitable replacement or obtain a guarantee. At September 30, 2023 and December 31, 2022, the liability recorded for these derivative contracts was not significant.
The following table presents the amount of additional collateral that would have been contractually required by derivative contracts and other trading agreements at September 30, 2023 if the rating agencies had downgraded
their long-term senior debt ratings for the Corporation or certain subsidiaries by one incremental notch and by an additional second incremental notch. The table also presents derivative liabilities that would be subject to unilateral termination by counterparties upon downgrade of the Corporation's or certain subsidiaries’ long-term senior debt ratings.
Additional Collateral Required to be Posted and Derivative Liabilities Subject to Unilateral Termination Upon Downgrade at September 30, 2023
(Dollars in millions)
One Incremental Notch
Second Incremental Notch
Additional collateral required to be posted upon downgrade
Bank of America Corporation
$
174
$
951
Bank of America, N.A. and subsidiaries (1)
82
793
Derivative liabilities subject to unilateral termination upon downgrade
Derivative liabilities
$
57
$
477
Collateral posted
56
312
(1)Included in Bank of America Corporation collateral requirements in this table.
Valuation Adjustments on Derivatives
The table below presents credit valuation adjustment (CVA), DVA and FVA gains (losses) on derivatives (excluding the effect of any related hedge activities), which are recorded in market making and similar activities, for the three and nine months ended September 30, 2023 and 2022. For more information on the valuation adjustments on derivatives, see Note 3 – Derivatives to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K.
Valuation Adjustments Gains (Losses) on Derivatives (1)
Three Months Ended September 30
(Dollars in millions)
2023
2022
Derivative assets (CVA)
$
30
$
(44)
Derivative assets/liabilities (FVA)
21
67
Derivative liabilities (DVA)
18
103
Nine Months Ended September 30
(Dollars in millions)
2023
2022
Derivative assets (CVA)
$
151
$
(217)
Derivative assets/liabilities (FVA)
4
147
Derivative liabilities (DVA)
(66)
444
(1)At September 30, 2023 and December 31, 2022, cumulative CVA reduced the derivative assets balance by $367 million and $518 million, cumulative FVA reduced the net derivative balance by $50 million and $54 million, and cumulative DVA reduced the derivative liabilities balance by $440 million and $506 million.
63Bank of America
NOTE 4Securities
The table below presents the amortized cost, gross unrealized gains and losses, and fair value of available-for-sale (AFS) debt securities, other debt securities carried at fair value and held-to-maturity (HTM) debt securities at September 30, 2023 and December 31, 2022.
Debt Securities
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
(Dollars in millions)
September 30, 2023
December 31, 2022
Available-for-sale debt securities
Mortgage-backed securities:
Agency
$
22,435
$
—
$
(1,931)
$
20,504
$
25,204
$
5
$
(1,767)
$
23,442
Agency-collateralized mortgage obligations
1,964
—
(266)
1,698
2,452
—
(231)
2,221
Commercial
7,309
14
(582)
6,741
6,894
28
(515)
6,407
Non-agency residential (1)
452
3
(68)
387
461
15
(90)
386
Total mortgage-backed securities
32,160
17
(2,847)
29,330
35,011
48
(2,603)
32,456
U.S. Treasury and government agencies
104,828
6
(1,198)
103,636
160,773
18
(1,769)
159,022
Non-U.S. securities
18,901
18
(47)
18,872
13,455
4
(52)
13,407
Other taxable securities
3,271
1
(93)
3,179
4,728
1
(84)
4,645
Tax-exempt securities
10,965
—
(372)
10,593
11,518
19
(279)
11,258
Total available-for-sale debt securities
170,125
42
(4,557)
165,610
225,485
90
(4,787)
220,788
Other debt securities carried at fair value (2)
9,933
56
(59)
9,930
8,986
376
(156)
9,206
Total debt securities carried at fair value
180,058
98
(4,616)
175,540
234,471
466
(4,943)
229,994
Held-to-maturity debt securities
Agency mortgage-backed securities
474,100
—
(106,890)
367,210
503,233
—
(87,319)
415,914
U.S. Treasury and government agencies
121,633
—
(23,351)
98,282
121,597
—
(20,259)
101,338
Other taxable securities
7,632
—
(1,363)
6,269
8,033
—
(1,018)
7,015
Total held-to-maturity debt securities
603,365
—
(131,604)
471,761
632,863
—
(108,596)
524,267
Total debt securities (3,4)
$
783,423
$
98
$
(136,220)
$
647,301
$
867,334
$
466
$
(113,539)
$
754,261
(1)At both September 30, 2023 and December 31, 2022, the underlying collateral type included approximately 17 percent prime and 83 percent subprime.
(2)Primarily includes non-U.S. securities used to satisfy certain international regulatory requirements. Any changes in value are reported in market making and similar activities. For detail on the components, see Note 14 – Fair Value Measurements.
(3)Includes securities pledged as collateral of $141.0 billion and $104.5 billion at September 30, 2023 and December 31, 2022.
(4)The Corporation held debt securities from Fannie Mae (FNMA) and Freddie Mac (FHLMC) that each exceeded 10 percent of shareholders’ equity, with an amortized cost of $273.7 billion and $167.8 billion, and a fair value of $211.5 billion and $129.0 billion at September 30, 2023, and an amortized cost of $290.5 billion and $176.7 billion, and a fair value of $239.6 billion and $144.6 billion at December 31, 2022.
At September 30, 2023, the accumulated net unrealized loss on AFS debt securities, excluding the amount related to debt securities previously transferred to held to maturity, included in accumulated OCI was $3.4 billion, net of the related income tax benefit of $1.1 billion. At September 30, 2023 and December 31, 2022, nonperforming AFS debt securities held by the Corporation were not significant.
At September 30, 2023 and December 31, 2022, $738.2 billion and $826.5 billion of AFS and HTM debt securities, which were predominantly U.S. agency and U.S. Treasury securities, have a zero credit loss assumption. For the same periods, the ECL on the remaining $35.3 billion and $31.8 billion of AFS and HTM debt securities were insignificant. For more information on the zero credit loss assumption, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K.
At September 30, 2023 and December 31, 2022, the Corporation held equity securities at an aggregate fair value of $270 million and $581 million and other equity securities, as valued under the measurement alternative, at a carrying value of $373 million and $340 million, both of which are included in
other assets. At September 30, 2023 and December 31, 2022, the Corporation also held money market investments at a fair value of $1.1 billion and $868 million, which are included in time deposits placed and other short-term investments.
The gross realized gains and losses on sales of AFS debt securities for the three and nine months ended September 30, 2023 and 2022 are presented in the table below.
Gains and Losses on Sales of AFS Debt Securities
Three Months Ended September 30
Nine Months Ended September 30
(Dollars in millions)
2023
2022
2023
2022
Gross gains
$
—
$
540
$
104
$
1,243
Gross losses
—
(526)
(508)
(1,206)
Net gains (losses) on sales of AFS debt securities
$
—
$
14
$
(404)
$
37
Income tax expense (benefit) attributable to realized net gains (losses) on sales of AFS debt securities
$
—
$
4
$
(101)
$
9
Bank of America 64
The table below presents the fair value and the associated gross unrealized losses on AFS debt securities and whether these securities have had gross unrealized losses for less than 12 months or for 12 months or longer at September 30, 2023 and December 31, 2022.
Total AFS Debt Securities in a Continuous Unrealized Loss Position
Total AFS debt securities in a continuous unrealized loss position
$
72,233
$
(1,815)
$
131,635
$
(2,972)
$
203,868
$
(4,787)
65Bank of America
The remaining contractual maturity distribution and yields of the Corporation’s debt securities carried at fair value and HTM debt securities at September 30, 2023 are summarized in the table below. Actual duration and yields may differ as prepayments on the loans underlying the mortgage-backed securities (MBS) or other asset-backed securities (ABS) are passed through to the Corporation.
Maturities of Debt Securities Carried at Fair Value and Held-to-maturity Debt Securities
Due in One Year or Less
Due after One Year through Five Years
Due after Five Years through Ten Years
Due after Ten Years
Total
(Dollars in millions)
Amount
Yield (1)
Amount
Yield (1)
Amount
Yield (1)
Amount
Yield (1)
Amount
Yield (1)
Amortized cost of debt securities carried at fair value
Mortgage-backed securities:
Agency
$
—
—
%
$
4
3.75
%
$
31
5.35
%
$
22,400
3.53
%
$
22,435
3.53
%
Agency-collateralized mortgage obligations
—
—
—
—
—
—
1,964
2.79
1,964
2.79
Commercial
—
—
1,129
3.06
4,619
2.59
1,574
2.45
7,322
2.63
Non-agency residential
—
—
—
—
—
—
735
10.18
735
10.18
Total mortgage-backed securities
—
—
1,133
3.07
4,650
2.61
26,673
3.60
32,456
3.44
U.S. Treasury and government agencies
37,773
5.23
45,637
3.05
22,437
2.33
39
3.89
105,886
3.67
Non-U.S. securities
17,748
2.04
5,850
1.17
3,203
5.40
678
5.26
27,479
2.33
Other taxable securities
409
5.60
2,355
6.08
294
3.00
213
3.60
3,271
5.59
Tax-exempt securities
1,234
4.13
3,801
3.64
1,997
3.85
3,934
4.23
10,966
3.95
Total amortized cost of debt securities carried at fair value
$
57,164
4.22
$
58,776
3.02
$
32,581
2.77
$
31,537
3.71
$
180,058
3.48
Amortized cost of HTM debt securities
Agency mortgage-backed securities
$
—
—
%
$
—
—
%
$
12
2.75
%
$
474,088
2.12
%
$
474,100
2.12
%
U.S. Treasury and government agencies
—
—
4,558
1.80
117,075
1.37
—
—
121,633
1.39
Other taxable securities
42
5.82
1,262
2.50
272
3.29
6,056
2.49
7,632
2.54
Total amortized cost of HTM debt securities
$
42
5.82
$
5,820
1.95
$
117,359
1.37
$
480,144
2.12
$
603,365
1.97
Debt securities carried at fair value
Mortgage-backed securities:
Agency
$
—
$
4
$
31
$
20,469
$
20,504
Agency-collateralized mortgage obligations
—
—
—
1,698
1,698
Commercial
1
1,092
4,354
1,305
6,752
Non-agency residential
—
2
—
668
670
Total mortgage-backed securities
1
1,098
4,385
24,140
29,624
U.S. Treasury and government agencies
37,776
44,973
21,910
35
104,694
Non-U.S. securities
17,737
5,834
3,199
678
27,448
Other taxable securities
407
2,330
248
198
3,183
Tax-exempt securities
1,229
3,725
1,942
3,695
10,591
Total debt securities carried at fair value
$
57,150
$
57,960
$
31,684
$
28,746
$
175,540
Fair value of HTM debt securities
Agency mortgage-backed securities
$
—
$
—
$
10
$
367,200
$
367,210
U.S. Treasury and government agencies
—
4,153
94,129
—
98,282
Other taxable securities
42
1,169
210
4,848
6,269
Total fair value of HTM debt securities
$
42
$
5,322
$
94,349
$
372,048
$
471,761
(1)The weighted-average yield is computed based on a constant effective interest rate over the contractual life of each security. The average yield considers the contractual coupon and the amortization of premiums and accretion of discounts, excluding the effect of related hedging derivatives.
Bank of America 66
NOTE 5Outstanding Loans and Leases and Allowance for Credit Losses
The following tables present total outstanding loans and leases and an aging analysis for the Consumer Real Estate, Credit Card and Other Consumer, and Commercial portfolio segments, by class of financing receivables, at September 30, 2023 and December 31, 2022.
30-59 Days
Past Due (1)
60-89 Days
Past Due (1)
90 Days or More
Past Due (1)
Total Past Due 30 Days or More
Total
Current or
Less Than
30 Days
Past Due (1)
Loans Accounted for Under the Fair Value Option
Total Outstandings
(Dollars in millions)
September 30, 2023
Consumer real estate
Residential mortgage
$
1,143
$
278
$
874
$
2,295
$
226,871
$
229,166
Home equity
88
42
171
301
25,191
25,492
Credit card and other consumer
Credit card
626
455
1,016
2,097
97,590
99,687
Direct/Indirect consumer (2)
267
85
75
427
103,632
104,059
Other consumer
—
—
—
—
122
122
Total consumer
2,124
860
2,136
5,120
453,406
458,526
Consumer loans accounted for under the fair value option (3)
$
253
253
Total consumer loans and leases
2,124
860
2,136
5,120
453,406
253
458,779
Commercial
U.S. commercial
312
345
187
844
355,486
356,330
Non-U.S. commercial
27
16
65
108
123,605
123,713
Commercial real estate (4)
96
258
341
695
72,498
73,193
Commercial lease financing
15
12
16
43
13,861
13,904
U.S. small business commercial (5)
134
76
186
396
18,837
19,233
Total commercial
584
707
795
2,086
584,287
586,373
Commercial loans accounted for under the fair value option (3)
3,997
3,997
Total commercial loans and leases
584
707
795
2,086
584,287
3,997
590,370
Total loans and leases (6)
$
2,708
$
1,567
$
2,931
$
7,206
$
1,037,693
$
4,250
$
1,049,149
Percentage of outstandings
0.26
%
0.15
%
0.28
%
0.69
%
98.91
%
0.40
%
100.00
%
(1)Consumer real estate loans 30-59 days past due includes fully-insured loans of $187 million and nonperforming loans of $167 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $70 million and nonperforming loans of $108 million. Consumer real estate loans 90 days or more past due includes fully-insured loans of $266 million and nonperforming loans of $779 million. Consumer real estate loans current or less than 30 days past due includes $1.6 billion, and direct/indirect consumer includes $37 million of nonperforming loans.
(2)Total outstandings primarily includes auto and specialty lending loans and leases of $54.0 billion, U.S. securities-based lending loans of $46.5 billion and non-U.S. consumer loans of $2.8 billion.
(3)Consumer loans accounted for under the fair value option includes residential mortgage loans of $67 million and home equity loans of $186 million. Commercial loans accounted for under the fair value option includes U.S. commercial loans of $2.5 billion and non-U.S. commercial loans of $1.5 billion. For more information, see Note 14 – Fair Value Measurements and Note 15 – Fair Value Option.
(4)Total outstandings includes U.S. commercial real estate loans of $67.3 billion and non-U.S. commercial real estate loans of $5.9 billion.
(5)Includes Paycheck Protection Program loans.
(6)Total outstandings includes loans and leases pledged as collateral of $40.3 billion. The Corporation also pledged $227.7 billion of loans with no related outstanding borrowings to secure potential borrowing capacity with the Federal Reserve Bank and Federal Home Loan Bank.
67Bank of America
30-59 Days Past Due (1)
60-89 Days
Past Due (1)
90 Days or More Past Due (1)
Total Past Due 30 Days or More
Total
Current or
Less Than
30 Days
Past Due (1)
Loans Accounted for Under the Fair Value Option
Total Outstandings
(Dollars in millions)
December 31, 2022
Consumer real estate
Residential mortgage
$
1,077
$
245
$
945
$
2,267
$
227,403
$
229,670
Home equity
88
32
211
331
26,232
26,563
Credit card and other consumer
Credit card
466
322
717
1,505
91,916
93,421
Direct/Indirect consumer (2)
204
59
45
308
105,928
106,236
Other consumer
—
—
—
—
156
156
Total consumer
1,835
658
1,918
4,411
451,635
456,046
Consumer loans accounted for under the fair value option (3)
$
339
339
Total consumer loans and leases
1,835
658
1,918
4,411
451,635
339
456,385
Commercial
U.S. commercial
827
288
330
1,445
357,036
358,481
Non-U.S. commercial
317
59
144
520
123,959
124,479
Commercial real estate (4)
409
81
77
567
69,199
69,766
Commercial lease financing
49
9
11
69
13,575
13,644
U.S. small business commercial (5)
107
63
356
526
17,034
17,560
Total commercial
1,709
500
918
3,127
580,803
583,930
Commercial loans accounted for under the fair value option (3)
5,432
5,432
Total commercial loans and leases
1,709
500
918
3,127
580,803
5,432
589,362
Total loans and leases (6)
$
3,544
$
1,158
$
2,836
$
7,538
$
1,032,438
$
5,771
$
1,045,747
Percentage of outstandings
0.34
%
0.11
%
0.27
%
0.72
%
98.73
%
0.55
%
100.00
%
(1)Consumer real estate loans 30-59 days past due includes fully-insured loans of $184 million and nonperforming loans of $155 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $75 million and nonperforming loans of $88 million. Consumer real estate loans 90 days or more past due includes fully-insured loans of $368 million and nonperforming loans of $788 million. Consumer real estate loans current or less than 30 days past due includes $1.6 billion, and direct/indirect consumer includes $27 million of nonperforming loans.
(2)Total outstandings primarily includes auto and specialty lending loans and leases of $51.8 billion, U.S. securities-based lending loans of $50.4 billion and non-U.S. consumer loans of $3.0 billion.
(3)Consumer loans accounted for under the fair value option includes residential mortgage loans of $71 million and home equity loans of $268 million. Commercial loans accounted for under the fair value option includes U.S. commercial loans of $2.9 billion and non-U.S. commercial loans of $2.5 billion. For more information, see Note 14 – Fair Value Measurements and Note 15 – Fair Value Option.
(4)Total outstandings includes U.S. commercial real estate loans of $64.9 billion and non-U.S. commercial real estate loans of $4.8 billion.
(5)Includes Paycheck Protection Program loans.
(6)Total outstandings includes loans and leases pledged as collateral of $18.5 billion. The Corporation also pledged $163.6 billion of loans with no related outstanding borrowings to secure potential borrowing capacity with the Federal Reserve Bank and Federal Home Loan Bank.
The Corporation has entered into long-term credit protection agreements with FNMA and FHLMC on loans totaling $8.9 billion and $9.5 billion at September 30, 2023 and December 31, 2022, providing full credit protection on residential mortgage loans that become severely delinquent. All of these loans are individually insured, and therefore the Corporation does not record an allowance for credit losses related to these loans.
Nonperforming Loans and Leases
Commercial nonperforming loans increased to $2.0 billion at September 30, 2023 from $1.1 billion at December 31, 2022, driven by the commercial real estate office property type.
Consumer nonperforming loans were $2.8 billion at both September 30, 2023 and December 31, 2022.
The following table presents the Corporation’s nonperforming loans and leases and loans accruing past due 90 days or more at September 30, 2023 and December 31, 2022. Nonperforming LHFS are excluded from nonperforming loans and leases as they are recorded at either fair value or the lower of cost or fair value. For more information on the criteria for classification as nonperforming, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K.
Bank of America 68
Credit Quality
Nonperforming Loans and Leases
Accruing Past Due 90 Days or More
(Dollars in millions)
September 30 2023
December 31 2022
September 30 2023
December 31 2022
Residential mortgage (1)
$
2,185
$
2,167
$
265
$
368
With no related allowance (2)
1,987
1,973
—
—
Home equity (1)
479
510
—
—
With no related allowance (2)
393
393
—
—
Credit Card
n/a
n/a
1,016
717
Direct/indirect consumer
128
77
1
2
Total consumer
2,792
2,754
1,282
1,087
U.S. commercial
561
553
85
190
Non-U.S. commercial
102
212
4
25
Commercial real estate
1,343
271
6
46
Commercial lease financing
18
4
5
8
U.S. small business commercial
17
14
185
355
Total commercial
2,041
1,054
285
624
Total nonperforming loans
$
4,833
$
3,808
$
1,567
$
1,711
Percentage of outstanding loans and leases
0.46
%
0.37
%
0.15
%
0.16
%
(1)Residential mortgage loans accruing past due 90 days or more are fully-insured loans. At September 30, 2023 and December 31, 2022 residential mortgage included $180 million and $260 million of loans on which interest had been curtailed by the Federal Housing Administration (FHA), and therefore were no longer accruing interest, although principal was still insured, and $85 million and $108 million of loans on which interest was still accruing.
(2)Primarily relates to loans for which the estimated fair value of the underlying collateral less any costs to sell is greater than the amortized cost of the loans as of the reporting date.
n/a = not applicable
Credit Quality Indicators
The Corporation monitors credit quality within its Consumer Real Estate, Credit Card and Other Consumer, and Commercial portfolio segments based on primary credit quality indicators. For more information on the portfolio segments, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K. Within the Consumer Real Estate portfolio segment, the primary credit quality indicators are refreshed loan-to-value (LTV) and refreshed Fair Isaac Corporation (FICO) score. Refreshed LTV measures the carrying value of the loan as a percentage of the value of the property securing the loan, refreshed quarterly. Home equity loans are evaluated using combined loan-to-value (CLTV), which measures the carrying value of the Corporation’s loan and available line of credit combined with any outstanding senior liens against the property as a percentage of the value of the property securing the loan, refreshed quarterly. FICO score measures the creditworthiness of the borrower based on the financial obligations of the borrower and the borrower’s credit history. FICO scores are typically refreshed quarterly or more frequently. Certain borrowers (e.g., borrowers that have had debts discharged in a bankruptcy proceeding) may not have their FICO scores updated.
FICO scores are also a primary credit quality indicator for the Credit Card and Other Consumer portfolio segment and the business card portfolio within U.S. small business commercial. Within the Commercial portfolio segment, loans are evaluated using the internal classifications of pass rated or reservable criticized as the primary credit quality indicators. The term reservable criticized refers to those commercial loans that are internally classified or listed by the Corporation as Special Mention, Substandard or Doubtful, which are asset quality categories defined by regulatory authorities. These assets have an elevated level of risk and may have a high probability of default or total loss. Pass rated refers to all loans not considered reservable criticized. In addition to these primary credit quality indicators, the Corporation uses other credit quality indicators for certain types of loans.
The following tables present certain credit quality indicators and gross charge-offs for the Corporation's Consumer Real Estate, Credit Card and Other Consumer, and Commercial portfolio segments by year of origination, except for revolving loans and revolving loans that were modified into term loans, which are shown on an aggregate basis at September 30, 2023.
69Bank of America
Residential Mortgage – Credit Quality Indicators By Vintage
Term Loans by Origination Year
(Dollars in millions)
Total as of September 30, 2023
2023
2022
2021
2020
2019
Prior
Residential Mortgage
Refreshed LTV
Less than or equal to 90 percent
$
214,919
$
12,117
$
38,307
$
77,128
$
35,708
$
17,751
$
33,908
Greater than 90 percent but less than or equal to 100 percent
2,288
593
1,153
391
78
35
38
Greater than 100 percent
917
262
439
129
34
14
39
Fully-insured loans
11,042
351
374
3,483
2,893
867
3,074
Total Residential Mortgage
$
229,166
$
13,323
$
40,273
$
81,131
$
38,713
$
18,667
$
37,059
Residential Mortgage
Refreshed FICO score
Less than 620
$
2,269
$
78
$
432
$
578
$
382
$
118
$
681
Greater than or equal to 620 and less than 680
4,737
301
999
1,187
774
316
1,160
Greater than or equal to 680 and less than 740
23,364
1,416
4,743
6,977
3,860
1,920
4,448
Greater than or equal to 740
187,754
11,177
33,725
68,906
30,804
15,446
27,696
Fully-insured loans
11,042
351
374
3,483
2,893
867
3,074
Total Residential Mortgage
$
229,166
$
13,323
$
40,273
$
81,131
$
38,713
$
18,667
$
37,059
Gross charge-offs for the nine months ended September 30, 2023
$
26
$
—
$
4
$
8
$
4
$
2
$
8
Home Equity - Credit Quality Indicators
Total
Home Equity Loans and Reverse Mortgages (1)
Revolving Loans
Revolving Loans Converted to Term Loans
(Dollars in millions)
September 30, 2023
Home Equity
Refreshed LTV
Less than or equal to 90 percent
$
25,336
$
1,102
$
19,944
$
4,290
Greater than 90 percent but less than or equal to 100 percent
66
17
36
13
Greater than 100 percent
90
34
36
20
Total Home Equity
$
25,492
$
1,153
$
20,016
$
4,323
Home Equity
Refreshed FICO score
Less than 620
$
662
$
134
$
228
$
300
Greater than or equal to 620 and less than 680
1,129
125
568
436
Greater than or equal to 680 and less than 740
4,237
253
2,961
1,023
Greater than or equal to 740
19,464
641
16,259
2,564
Total Home Equity
$
25,492
$
1,153
$
20,016
$
4,323
Gross charge-offs for the nine months ended September 30, 2023
$
18
$
2
$
8
$
8
(1)Includes reverse mortgages of $788 million and home equity loans of $366 million, which are no longer originated.
Credit Card and Direct/Indirect Consumer – Credit Quality Indicators By Vintage
Direct/Indirect
Term Loans by Origination Year
Credit Card
(Dollars in millions)
Total Direct/ Indirect as of September 30, 2023
Revolving Loans
2023
2022
2021
2020
2019
Prior
Total Credit Card as of September 30, 2023
Revolving Loans
Revolving Loans Converted to Term Loans (1)
Refreshed FICO score
Less than 620
$
1,133
$
11
$
186
$
394
$
332
$
93
$
60
$
57
$
4,957
$
4,681
$
276
Greater than or equal to 620 and less than 680
2,502
12
745
861
558
151
87
88
11,440
11,189
251
Greater than or equal to 680 and less than 740
8,741
48
2,851
2,850
1,857
552
297
286
34,219
33,999
220
Greater than or equal to 740
41,720
74
13,418
12,831
8,602
3,303
1,739
1,753
49,071
49,021
50
Other internal credit
metrics (2,3)
49,963
49,285
72
175
145
54
55
177
—
—
—
Total credit card and other consumer
$
104,059
$
49,430
$
17,272
$
17,111
$
11,494
$
4,153
$
2,238
$
2,361
$
99,687
$
98,890
$
797
Gross charge-offs for the nine months ended September 30, 2023
$
153
$
3
$
13
$
65
$
37
$
11
$
7
$
17
$
2,220
$
2,139
$
81
(1)Represents loans that were modified into term loans.
(2)Other internal credit metrics may include delinquency status, geography or other factors.
(3)Direct/indirect consumer includes $49.3 billion of securities-based lending, which is typically supported by highly liquid collateral with market value greater than or equal to the outstanding loan balance and therefore has minimal credit risk at September 30, 2023.
Bank of America 70
Commercial – Credit Quality Indicators By Vintage (1)
Term Loans
Amortized Cost Basis by Origination Year
(Dollars in millions)
Total as of September 30, 2023
2023
2022
2021
2020
2019
Prior
Revolving Loans
U.S. Commercial
Risk ratings
Pass rated
$
344,382
$
28,937
$
46,312
$
28,465
$
14,786
$
13,015
$
31,832
$
181,035
Reservable criticized
11,948
157
1,203
817
419
733
1,379
7,240
Total U.S. Commercial
$
356,330
$
29,094
$
47,515
$
29,282
$
15,205
$
13,748
$
33,211
$
188,275
Gross charge-offs for the nine months ended
September 30, 2023
$
117
$
2
$
12
$
21
$
1
$
1
$
18
$
62
Non-U.S. Commercial
Risk ratings
Pass rated
$
121,753
$
12,530
$
17,368
$
16,282
$
2,770
$
3,078
$
6,528
$
63,197
Reservable criticized
1,960
26
183
272
147
244
174
914
Total Non-U.S. Commercial
$
123,713
$
12,556
$
17,551
$
16,554
$
2,917
$
3,322
$
6,702
$
64,111
Gross charge-offs for the nine months ended September 30, 2023
$
31
$
—
$
—
$
8
$
7
$
1
$
—
$
15
Commercial Real Estate
Risk ratings
Pass rated
$
65,055
$
3,452
$
16,292
$
12,454
$
4,393
$
8,034
$
10,771
$
9,659
Reservable criticized
8,138
65
662
1,674
530
1,847
2,970
390
Total Commercial Real Estate
$
73,193
$
3,517
$
16,954
$
14,128
$
4,923
$
9,881
$
13,741
$
10,049
Gross charge-offs for the nine months ended September 30, 2023
$
139
$
2
$
—
$
—
$
—
$
44
$
93
$
—
Commercial Lease Financing
Risk ratings
Pass rated
$
13,703
$
2,618
$
3,107
$
2,348
$
1,519
$
1,306
$
2,805
$
—
Reservable criticized
201
6
31
49
23
32
60
—
Total Commercial Lease Financing
$
13,904
$
2,624
$
3,138
$
2,397
$
1,542
$
1,338
$
2,865
$
—
Gross charge-offs for the nine months ended September 30, 2023
$
3
$
—
$
—
$
2
$
1
$
—
$
—
$
—
U.S. Small Business Commercial (2)
Risk ratings
Pass rated
$
8,919
$
1,476
$
1,849
$
1,617
$
922
$
752
$
1,886
$
417
Reservable criticized
379
5
45
89
44
66
127
3
Total U.S. Small Business Commercial
$
9,298
$
1,481
$
1,894
$
1,706
$
966
$
818
$
2,013
$
420
Gross charge-offs for the nine months ended September 30, 2023
$
31
$
—
$
2
$
1
$
14
$
2
$
3
$
9
Total
$
576,438
$
49,272
$
87,052
$
64,067
$
25,553
$
29,107
$
58,532
$
262,855
Gross charge-offs for the nine months ended
September 30, 2023
$
321
$
4
$
14
$
32
$
23
$
48
$
114
$
86
(1)Excludes $4.0 billion of loans accounted for under the fair value option at September 30, 2023.
(2)Excludes U.S. Small Business Card loans of $9.9 billion. Refreshed FICO scores for this portfolio are $473 million for less than 620; $1.0 billion for greater than or equal to 620 and less than 680; $2.7 billion for greater than or equal to 680 and less than 740; and $5.7 billion greater than or equal to 740. Excludes U.S. Small Business Card loans gross charge-offs of $223 million.
71Bank of America
The following tables present certain credit quality indicators for the Corporation's Consumer Real Estate, Credit Card and Other Consumer, and Commercial portfolio segments by year of origination, except for revolving loans and revolving loans that were modified into term loans, which are shown on an aggregate basis at December 31, 2022.
Residential Mortgage – Credit Quality Indicators By Vintage
Term Loans by Origination Year
(Dollars in millions)
Total as of December 31, 2022
2022
2021
2020
2019
2018
Prior
Residential Mortgage
Refreshed LTV
Less than or equal to 90 percent
$
215,713
$
39,625
$
81,437
$
37,228
$
18,980
$
5,734
$
32,709
Greater than 90 percent but less than or equal to 100 percent
1,615
950
530
93
15
8
19
Greater than 100 percent
648
374
169
43
15
8
39
Fully-insured loans
11,694
580
3,667
3,102
949
156
3,240
Total Residential Mortgage
$
229,670
$
41,529
$
85,803
$
40,466
$
19,959
$
5,906
$
36,007
Residential Mortgage
Refreshed FICO score
Less than 620
$
2,156
$
377
$
518
$
373
$
124
$
84
$
680
Greater than or equal to 620 and less than 680
4,978
1,011
1,382
840
329
233
1,183
Greater than or equal to 680 and less than 740
25,444
5,411
8,290
4,369
2,187
830
4,357
Greater than or equal to 740
185,398
34,150
71,946
31,782
16,370
4,603
26,547
Fully-insured loans
11,694
580
3,667
3,102
949
156
3,240
Total Residential Mortgage
$
229,670
$
41,529
$
85,803
$
40,466
$
19,959
$
5,906
$
36,007
Gross charge-offs for the year ended December 31, 2022
$
161
$
—
$
6
$
5
$
6
$
1
$
143
Home Equity - Credit Quality Indicators
Total
Home Equity Loans and Reverse Mortgages (1)
Revolving Loans
Revolving Loans Converted to Term Loans
(Dollars in millions)
December 31, 2022
Home Equity
Refreshed LTV
Less than or equal to 90 percent
$
26,395
$
1,304
$
19,960
$
5,131
Greater than 90 percent but less than or equal to 100 percent
62
20
24
18
Greater than 100 percent
106
37
35
34
Total Home Equity
$
26,563
$
1,361
$
20,019
$
5,183
Home Equity
Refreshed FICO score
Less than 620
$
683
$
166
$
189
$
328
Greater than or equal to 620 and less than 680
1,190
152
507
531
Greater than or equal to 680 and less than 740
4,321
312
2,747
1,262
Greater than or equal to 740
20,369
731
16,576
3,062
Total Home Equity
$
26,563
$
1,361
$
20,019
$
5,183
Gross charge-offs for the year ended December 31, 2022
$
45
$
5
$
24
$
16
(1)Includes reverse mortgages of $937 million and home equity loans of $424 million, which are no longer originated.
Bank of America 72
Credit Card and Direct/Indirect Consumer – Credit Quality Indicators By Vintage
Direct/Indirect
Term Loans by Origination Year
Credit Card
(Dollars in millions)
Total Direct/Indirect as of December 31, 2022
Revolving Loans
2022
2021
2020
2019
2018
Prior
Total Credit Card as of December 31, 2022
Revolving Loans
Revolving Loans Converted to Term Loans (1)
Refreshed FICO score
Less than 620
$
847
$
12
$
237
$
301
$
113
$
84
$
43
$
57
$
4,056
$
3,866
$
190
Greater than or equal to 620 and less than 680
2,521
12
1,108
816
269
150
69
97
10,994
10,805
189
Greater than or equal to 680 and less than 740
8,895
52
4,091
2,730
992
520
214
296
32,186
32,017
169
Greater than or equal to 740
39,679
83
16,663
11,392
5,630
2,992
1,236
1,683
46,185
46,142
43
Other internal credit
metrics (2, 3)
54,294
53,404
259
305
70
57
40
159
—
—
—
Total credit card and other consumer
$
106,236
$
53,563
$
22,358
$
15,544
$
7,074
$
3,803
$
1,602
$
2,292
$
93,421
$
92,830
$
591
Gross charge-offs for the year ended December 31, 2022
$
232
$
7
$
31
$
79
$
34
$
27
$
14
$
40
$
1,985
$
1,909
$
76
(1)Represents TDRs that were modified into term loans.
(2)Other internal credit metrics may include delinquency status, geography or other factors.
(3)Direct/indirect consumer includes $53.4 billion of securities-based lending, which is typically supported by highly liquid collateral with market value greater than or equal to the outstanding loan balance and therefore has minimal credit risk at December 31, 2022.
Commercial – Credit Quality Indicators By Vintage (1)
Term Loans
Amortized Cost Basis by Origination Year
(Dollars in millions)
Total as of December 31, 2022
2022
2021
2020
2019
2018
Prior
Revolving Loans
U.S. Commercial
Risk ratings
Pass rated
$
348,447
$
61,200
$
39,717
$
18,609
$
16,566
$
8,749
$
30,282
$
173,324
Reservable criticized
10,034
278
794
697
884
1,202
856
5,323
Total U.S. Commercial
$
358,481
$
61,478
$
40,511
$
19,306
$
17,450
$
9,951
$
31,138
$
178,647
Gross charge-offs for the year ended December 31, 2022
$
151
$
2
$
24
$
24
$
9
$
6
$
13
$
73
Non-U.S. Commercial
Risk ratings
Pass rated
$
121,890
$
24,839
$
19,098
$
5,183
$
3,882
$
2,423
$
4,697
$
61,768
Reservable criticized
2,589
45
395
331
325
98
475
920
Total Non-U.S. Commercial
$
124,479
$
24,884
$
19,493
$
5,514
$
4,207
$
2,521
$
5,172
$
62,688
Gross charge-offs for the year ended December 31, 2022
$
41
$
—
$
3
$
1
$
—
$
37
$
—
$
—
Commercial Real Estate
Risk ratings
Pass rated
$
64,619
$
15,290
$
13,089
$
5,756
$
9,013
$
4,384
$
8,606
$
8,481
Reservable criticized
5,147
11
837
545
1,501
1,151
1,017
85
Total Commercial Real Estate
$
69,766
$
15,301
$
13,926
$
6,301
$
10,514
$
5,535
$
9,623
$
8,566
Gross charge-offs for the year ended December 31, 2022
$
75
$
—
$
—
$
6
$
—
$
26
$
43
$
—
Commercial Lease Financing
Risk ratings
Pass rated
$
13,404
$
3,255
$
2,757
$
1,955
$
1,578
$
1,301
$
2,558
$
—
Reservable criticized
240
9
35
12
71
50
63
—
Total Commercial Lease Financing
$
13,644
$
3,264
$
2,792
$
1,967
$
1,649
$
1,351
$
2,621
$
—
Gross charge-offs for the year ended December 31, 2022
$
8
$
—
$
4
$
—
$
4
$
—
$
—
$
—
U.S. Small Business Commercial (2)
Risk ratings
Pass rated
$
8,726
$
1,825
$
1,953
$
1,408
$
864
$
624
$
1,925
$
127
Reservable criticized
329
11
35
48
76
51
105
3
Total U.S. Small Business Commercial
$
9,055
$
1,836
$
1,988
$
1,456
$
940
$
675
$
2,030
$
130
Gross charge-offs for the year ended December 31, 2022
$
31
$
—
$
1
$
11
$
4
$
1
$
6
$
8
Total
$
575,425
$
106,763
$
78,710
$
34,544
$
34,760
$
20,033
$
50,584
$
250,031
Total gross charge-offs for the year ended December 31, 2022
$
306
$
2
$
32
$
42
$
17
$
70
$
62
$
81
(1) Excludes $5.4 billion of loans accounted for under the fair value option at December 31, 2022.
(2) Excludes U.S. Small Business Card loans of $8.5 billion. Refreshed FICO scores for this portfolio are $297 million for less than 620; $859 million for greater than or equal to 620 and less than 680; $2.4 billion for greater than or equal to 680 and less than 740; and $5.0 billion greater than or equal to 740. Excludes U.S. Small Business Card loans gross charge-offs of $172 million.
73Bank of America
During the nine months ended September 30, 2023, commercial reservable criticized utilized exposure increased to $23.7 billion at September 30, 2023 from $19.3 billion (to 3.83 percent from 3.12 percent of total commercial reservable utilized exposure) at December 31, 2022, primarily driven by commercial real estate and U.S. Commercial.
Loan Modifications to Borrowers in Financial Difficulty
As part of its credit risk management, the Corporation may modify a loan agreement with a borrower experiencing financial difficulties through a refinancing or restructuring of the borrower’s loan agreement (modification programs).
Consumer Real Estate
The following modification programs are offered for consumer real estate loans to borrowers experiencing financial difficulties. These modifications represented 0.25 percent and 0.35 percent of outstanding residential mortgage and home equity loans at September 30, 2023.
Forbearance and Other Payment Plans: Forbearance plans generally consist of the Corporation suspending the borrower’s payments for a defined period with those payments then due at the conclusion of the forbearance period. The aging status of a loan is generally frozen when it enters into a forbearance plan. Alternatively, the Corporation may offer the borrower a payment plan, which allows the borrower to repay past due amounts through payments over a defined period. At September 30, 2023, the amortized cost of residential mortgage loans that were modified through these plans during the three and nine months ended September 30, 2023 was $270 million and $437 million. The amortized cost of home equity loans that were modified through these plans during the same periods was $39 million and $64 million. The weighted-average duration of residential mortgage loan modifications was approximately 4 months and 8 months for the three and nine months ended September 30, 2023. For the same periods, the weighted-average duration for home equity loan modifications was approximately 4 months and 9 months. The total forborne payments for residential mortgage loan modifications was $6 million and $19 million for the three and nine months ended September 30, 2023. For the same periods, the total forborne payments for home equity modifications was $2 million and $7 million. If a borrower is unable to fulfill their obligations under the forbearance plans, they may be offered a trial or permanent modification.
Trial Modifications: Trial modification plans generally consist of the Corporation offering a borrower modified loan terms that reduce their contractual payments temporarily over a three-to-four-month trial period. If the customer successfully makes the modified payments during the trial period and formally accepts the modified terms, the modified loan terms become permanent. At September 30, 2023, the amortized cost of residential mortgage loans entering trial modifications during the three and nine months ended September 30, 2023 was $33 million and $83 million. The amortized cost of home equity loans entering trial modifications during the same periods was $10 million and $31 million.
Permanent Modifications: Permanent modifications include borrowers that have completed a trial modification and have had their contractual payment terms permanently modified, as well as borrowers that proceed directly to a permanent modification without a trial period. In a permanent modification, the borrower’s payment terms are typically modified in more than one manner but generally include a term extension and an interest rate reduction. At times, the permanent modification may also include principal forgiveness and/or a deferral of past due principal and interest amounts to the end of the loan term. The combinations utilized are based on modifying the terms that give the borrower an improved ability to meet the contractual obligations. At September 30, 2023, the amortized cost of residential mortgage loans that were granted a permanent modification during the three and nine months ended September 30, 2023 was $47 million and $128 million. The amortized cost of home equity loans that were granted a permanent modification during the same periods was $9 million and $26 million. The term extensions granted for residential mortgage and home equity permanent modifications vary widely and can be up to 30 years, but are mostly in the range of 1 to 20 years for both residential mortgage and home equity loans. The weighted-average term extension of permanent modifications for residential mortgage loans was 12.1 years and 9.9 years for the three and nine months ended September 30, 2023, while the weighted-average interest rate reduction was 1.31 percent and 1.50 percent. For the same periods, the weighted-average term extension of permanent modifications for home equity loans was 17.2 years and 16.2 years, while the weighted-average interest rate reduction was 2.69 percent and 3.11 percent. Principal forgiveness and payment deferrals were insignificant for the three and nine months ended September 30, 2023.
For consumer real estate borrowers in financial difficulty that received a forbearance, trial or permanent modification, there were no commitments to lend additional funds at September 30, 2023. Borrowers with a home equity line of credit that received a forbearance plan could have all or a portion of their lines reinstated in the future if they cure their payment default and meet certain Bank conditions.
Chapter 7 Discharges: If a borrower’s consumer real estate obligation is discharged in a Chapter 7 bankruptcy proceeding, the contractual payment terms of the loan are not modified, although they can no longer be enforced against the individual borrower. The Corporation’s ability to collect amounts due on the loan is limited to enforcement against the property through the foreclosure and sale of the collateral. The Corporation will only pursue foreclosure upon default by the borrower, and otherwise will recover pursuant to the loan terms or at the time of a sale. Residential mortgage and home equity loans that were granted a Chapter 7 discharge were insignificant for the three and nine months ended September 30, 2023.
The Corporation tracks the performance of modified loans to assess effectiveness of modification programs. Defaults of modified residential mortgage and home equity loans since January 1, 2023 were $160 million and $26 million during the nine months ended September 30, 2023. The table below provides aging information as of September 30, 2023 for consumer real estate loans modified since January 1, 2023.
Bank of America 74
Consumer Real Estate - Payment Status of Modifications to Borrowers in Financial Difficulty (1)
Current
30–89 Days Past Due
90+ Days Past Due
Total
(Dollars in millions)
September 30, 2023
Residential mortgage
$
295
$
114
$
156
$
565
Home equity
51
11
28
90
Total
$
346
$
125
$
184
$
655
(1)Excludes trial modifications and Chapter 7 discharges
Consumer real estate foreclosed properties totaled $93 million and $121 million at September 30, 2023 and December 31, 2022. The carrying value of consumer real estate loans, including fully-insured loans, for which formal foreclosure proceedings were in process at September 30, 2023 and December 31, 2022 was $684 million and $871 million. During the nine months ended September 30, 2023 and 2022, the Corporation reclassified $86 million and $151 million of consumer real estate loans to foreclosed properties or, for properties acquired upon foreclosure of certain government-guaranteed loans (principally FHA-insured loans), to other assets. The reclassifications represent non-cash investing activities and, accordingly, are not reflected in the Consolidated Statement of Cash Flows.
Credit Card and Other Consumer
Credit card and other consumer loans are primarily modified by placing the customer on a fixed payment plan with a significantly reduced fixed interest rate, with terms ranging from 6 months to 72 months. As of September 30, 2023, substantially all payment plans provided to customers had a 60-month term. In certain circumstances, the Corporation will forgive a portion of the outstanding balance if the borrower makes payments up to a set amount. The Corporation makes modifications directly with borrowers for loans held by the Corporation (internal programs) as well as through third-party renegotiation agencies that provide solutions to customers’ entire unsecured debt structures (external programs). The September 30, 2023 amortized cost of credit card and other consumer loans that were modified through these programs during the three and nine months ended September 30, 2023 was $196 million and $455 million. The weighted-average interest rate reduction for the modifications was 19.40 percent and 19.02 percent, and
principal forgiveness was $16 million and $41 million during the three and nine months ended September 30, 2023.
The Corporation tracks the performance of modified loans to assess the effectiveness of modification programs. Defaults of modified credit card and other consumer loans since January 1, 2023 were insignificant during the three and nine months ended September 30, 2023. Of the $455 million in modified credit card and other consumer loans to borrowers experiencing financial difficulty as of September 30, 2023, $370 million were current, $47 million were 30-89 days past due, and $38 million were greater than 90 days past due. These modifications represented 0.22 percent of outstanding credit card and other consumer loans at September 30, 2023.
Commercial Loans
Modifications of loans to commercial borrowers experiencing financial difficulty are designed to reduce the Corporation’s loss exposure while providing borrowers with an opportunity to work through financial difficulties, often to avoid foreclosure or bankruptcy. Each modification is unique, reflects the borrower’s individual circumstances and is designed to benefit the borrower while mitigating the Corporation’s risk exposure. Commercial modifications are primarily term extensions and payment forbearances. Payment forbearances involve the Bank forbearing its contractual right to collect certain payments or payment in full (maturity forbearance) for a defined period of time. Reductions in interest rates and principal forgiveness occur infrequently for commercial borrowers. Principal forgiveness may occur in connection with foreclosure, short sales or other settlement agreements, leading to termination or sale of the loan. The table below provides the ending amortized cost of commercial loans modified during the three and nine months ended September 30, 2023.
Commercial Loans - Modifications to Borrowers in Financial Difficulty
Term Extension
Forbearances
Interest Rate Reduction
Total
(Dollars in millions)
Three Months Ended September 30, 2023
U.S. Commercial
$
431
$
24
$
—
$
455
Non-U.S. Commercial
130
—
24
154
Commercial Real Estate
599
219
—
818
Total
$
1,160
$
243
$
24
$
1,427
Nine Months Ended September 30, 2023
U.S. Commercial
$
768
$
33
$
—
$
801
Non-U.S. Commercial
162
—
24
186
Commercial Real Estate
1,069
287
—
1,356
Total
$
1,999
$
320
$
24
$
2,343
Term extensions granted increased the weighted-average life of the impacted loans by 1.8 years at both the three and nine months ended September 30, 2023. The weighted-average duration of loan payments deferred under the Corporation’s
commercial loan forbearance program was 8 months for the three months ended September 30, 2023 and 9 months for the nine months ended September 30, 2023. The deferral period for loan payments can vary, but are mostly in the range of 9
75Bank of America
months to 24 months. The weighted-average interest rate reduction was 0.59 percent for both the three and nine months ended September 30, 2023. Modifications of loans to troubled borrowers for Commercial Lease Financing and U.S. Small Business Commercial were not significant during the three and nine months ended September 30, 2023.
The Corporation tracks the performance of modified loans to assess effectiveness of modification programs. Defaults of modified Commercial loans since January 1, 2023 were insignificant during the nine months ended September 30, 2023. The table below provides aging information as of September 30, 2023 for commercial loans modified since January 1, 2023.
Commercial - Payment Status of Modified Loans to Borrowers in Financial Difficulty
Current
30–89 Days Past Due
90+ Days Past Due
Total
% of Total Class of Financing Receivable
(Dollars in millions)
September 30, 2023
U.S. Commercial
$
766
$
21
$
14
$
801
0.22
%
Non-U.S. Commercial
186
—
—
186
0.15
Commercial Real Estate
1,083
60
213
1,356
1.85
Total
$
2,035
$
81
$
227
$
2,343
0.42
For the nine months ended September 30, 2023, the Corporation had commitments to lend $871 million to commercial borrowers experiencing financial difficulty whose loans were modified during the period.
Prior to adopting the new accounting standard on loan modifications, the Corporation accounted for modifications of loans to borrowers experiencing financial difficulty as TDRs, when the modification resulted in a concession. The following discussion reflects loans that were considered TDRs prior to January 1, 2023. For more information on TDR accounting policies, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K.
Consumer Real Estate
The table below presents the September 30, 2022 unpaid principal balance, carrying value, and average pre- and post-modification interest rates of consumer real estate loans that were modified in TDRs during the three and nine months ended September 30, 2022. The following Consumer Real Estate portfolio segment tables include loans that were initially classified as TDRs during the period and also loans that had previously been classified as TDRs and were modified again during the period. Binding trial modifications are classified as TDRs when the trial offer is made and continue to be classified as TDRs regardless of whether the borrower enters into a permanent modification.
At December 31, 2022, remaining commitments to lend additional funds to debtors whose terms have been modified in a consumer real estate TDR were not significant.
Consumer Real Estate – TDRs Entered into During the Three and Nine Months Ended September 30, 2022
Unpaid Principal Balance
Carrying Value
Pre-Modification Interest Rate
Post-Modification Interest Rate (1)
Unpaid Principal Balance
Carrying Value
Pre-Modification Interest Rate
Post-Modification Interest Rate (1)
(Dollars in millions)
Three Months Ended September 30, 2022
Nine Months Ended September 30, 2022
Residential mortgage
$
420
$
379
3.35
%
3.34
%
$
1,036
$
929
3.50
%
3.36
%
Home equity
99
86
4.58
4.83
216
176
4.20
4.31
Total
$
519
$
465
3.58
3.62
$
1,252
$
1,105
3.62
3.52
(1)The post-modification interest rate reflects the interest rate applicable only to permanently completed modifications, which exclude loans that are in a trial modification period.
The table below presents the September 30, 2022 carrying value for consumer real estate loans that were modified in a TDR during the three and nine months ended September 30, 2022, by type of modification.
Consumer Real Estate – Modification Programs
(Dollars in millions)
TDRs Entered into During the Three Months Ended September 30, 2022
TDRs Entered into During the Nine Months Ended September 30, 2022
Modifications under proprietary programs
$
420
$
999
Loans discharged in Chapter 7 bankruptcy (1)
4
12
Trial modifications
41
94
Total modifications
$
465
$
1,105
(1)Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs.
Bank of America 76
The table below presents the carrying value of consumer real estate loans that entered into payment default during the three and nine months ended September 30, 2022 that were modified in a TDR during the 12 months preceding payment default. A payment default for consumer real estate TDRs is recognized when a borrower has missed three monthly payments (not necessarily consecutively) since modification.
Consumer Real Estate – TDRs Entering Payment Default that were Modified During the Preceding 12 Months
(Dollars in millions)
Three Months Ended September 30, 2022
Nine Months Ended September 30, 2022
Modifications under proprietary programs
$
63
$
135
Loans discharged in Chapter 7 bankruptcy (1)
1
2
Trial modifications (2)
8
19
Total modifications
$
72
$
156
(1)Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs.
(2)Includes trial modification offers to which the customer did not respond.
Credit Card and Other Consumer
The table below provides information on the Corporation’s Credit Card and Other Consumer TDR portfolio including the September 30, 2022 unpaid principal balance, carrying value, and average pre- and post-modification interest rates of loans that were modified in TDRs during the three and nine months ended September 30, 2022.
Credit Card and Other Consumer – TDRs Entered into During the Three and Nine Months Ended September 30, 2022
Unpaid Principal Balance
Carrying
Value (1)
Pre-Modification Interest Rate
Post-Modification Interest Rate
Unpaid Principal Balance
Carrying Value (1)
Pre-Modification Interest Rate
Post-Modification Interest Rate
(Dollars in millions)
Three Months Ended September 30, 2022
Nine Months Ended September 30, 2022
Credit card
$
86
$
90
21.17
%
3.80
%
$
198
$
206
21.02
%
3.82
%
Direct/Indirect consumer
2
2
5.65
5.65
5
4
5.48
5.48
Total
$
88
$
92
20.87
3.83
$
203
$
210
20.69
3.86
(1)Includes accrued interest and fees.
The table below presents the September 30, 2022 carrying value for Credit Card and Other Consumer loans that were modified in a TDR during the three and nine months ended September 30, 2022 by program type.
Credit Card and Other Consumer – TDRs by Program Type (1)
(Dollars in millions)
TDRs Entered into During the Three Months Ended September 30, 2022
TDRs Entered into During the Nine Months Ended September 30, 2022
Internal programs
$
77
$
174
External programs
13
32
Other
2
4
Total
$
92
$
210
(1) Includes accrued interest and fees.
Credit card and other consumer loans are deemed to be in payment default during the quarter in which a borrower misses the second of two consecutive payments. Payment defaults are one of the factors considered when projecting future cash flows in the calculation of the allowance for loan and lease losses for credit card and other consumer. Based on historical experience, the Corporation estimates that 12 percent of new credit card TDRs and 20 percent of new direct/indirect consumer TDRs may be in payment default within 12 months after modification.
Commercial Loans
During the three and nine months ended September 30, 2022, the carrying value of the Corporation’s commercial loans that were modified as TDRs was $745 million and $1.7 billion. At December 31, 2022, the Corporation had commitments to lend $358 million to commercial borrowers whose loans were classified as TDRs. The balance of commercial TDRs in payment default was $105 million at December 31, 2022.
Loans Held-for-sale
The Corporation had LHFS of $7.6 billion and $6.9 billion at September 30, 2023 and December 31, 2022. Cash and non-
cash proceeds from sales and paydowns of loans originally classified as LHFS were $10.8 billion and $27.8 billion for the nine months ended September 30, 2023 and 2022. Cash used for originations and purchases of LHFS totaled $11.5 billion and $18.7 billion for the nine months ended September 30, 2023 and 2022.Also included were non-cash net transfers into LHFS of $634 million and $2.1 billion for the nine months ended September 30, 2023 and 2022.
Accrued Interest Receivable
Accrued interest receivable for loans and leases and loans held-for-sale at September 30, 2023 and December 31, 2022 was $4.3 billion and $3.8 billion and is reported in customer and other receivables on the Consolidated Balance Sheet.
Outstanding credit card loan balances include unpaid principal, interest and fees. Credit card loans are not classified as nonperforming but are charged off no later than the end of the month in which the account becomes 180 days past due, within 60 days after receipt of notification of death or bankruptcy, or upon confirmation of fraud. During the three and nine months ended September 30, 2023, the Corporation
77Bank of America
reversed $152 million and $409 million of interest and fee income against the income statement line item in which it was originally recorded upon charge-off of the principal balance of the loan compared to $81 million and $241 million for the same periods in 2022.
For the outstanding residential mortgage, home equity, direct/indirect consumer and commercial loan balances classified as nonperforming during the three and nine months ended September 30, 2023 and 2022, interest and fee income reversed at the time the loans were classified as nonperforming was not significant. For more information on the Corporation's nonperforming loan policies, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K.
Allowance for Credit Losses
The allowance for credit losses is estimated using quantitative and qualitative methods that consider a variety of factors, such as historical loss experience, the current credit quality of the portfolio and an economic outlook over the life of the loan. Qualitative reserves cover losses that are expected but, in the Corporation's assessment, may not be adequately reflected in the quantitative methods or the economic assumptions. The Corporation incorporates forward-looking information through the use of several macroeconomic scenarios in determining the weighted economic outlook over the forecasted life of the assets. These scenarios include key macroeconomic variables such as gross domestic product, unemployment rate, real estate prices and corporate bond spreads. The scenarios that are chosen each quarter and the weighting given to each scenario depend on a variety of factors including recent economic events, leading economic indicators, internal and third-party economist views, and industry trends. For more information on the Corporation's credit loss accounting policies including the allowance for credit losses, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K.
The September 30, 2023 estimate for allowance for credit losses was based on various economic scenarios, including a baseline scenario derived from consensus estimates, an adverse scenario reflecting an extended moderate recession, a downside scenario reflecting persistent inflation and interest rates above the baseline scenario, a tail risk scenario similar to the severely adverse scenario used in stress testing and an upside scenario that considers the potential for improvement above the baseline scenario. The overall weighted economic outlook of the above scenarios is estimating a mild recessionary environment in late 2023 and early 2024, which has modestly improved compared to the weighted economic outlook
estimated as of December 31, 2022. The weighted economic outlook assumes that the U.S. average unemployment rate will be just above five percent by the fourth quarter of 2024 and will remain near this level through the fourth quarter of 2025. Additionally, in this economic outlook, U.S. real gross domestic product is forecasted to grow at 0.5 percent and at 1.6 percent year-over-year in the fourth quarters of 2024 and 2025.
The allowance for credit losses increased $418 million from December 31, 2022 to $14.6 billion at September 30, 2023, which included a $921 million reserve increase related to the consumer portfolio and a $503 million reserve decrease related to the commercial portfolio. The increase in the allowance reflected a reserve build in the Corporation’s consumer portfolio primarily due to credit card loan growth and asset quality, partially offset by a reserve release in the Corporation’s commercial portfolio primarily driven by certain improved macroeconomic conditions. The allowance also includes the impact of the accounting change to remove the recognition and measurement guidance on TDRs, which reduced the allowance for credit losses by $243 million on January 1, 2023. The change in the allowance for credit losses was comprised of a net increase of $605 million in the allowance for loan and lease losses and a decrease of $187 million in the reserve for unfunded lending commitments. The provision for credit losses increased $336 million to $1.2 billion, and $1.8 billion to $3.3 billion for the three and nine months ended September 30, 2023 compared to the same periods in 2022. The provision for credit losses for the current-year periods was driven by the Corporation’s consumer portfolio primarily due to credit card loan growth and asset quality, partially offset by certain improved macroeconomic conditions that primarily benefited the Corporation’s commercial portfolio. In addition, provision for credit losses for the three months ended September 30, 2023 benefited from commercial net paydowns. For the three-month period in the prior year, the provision for credit losses was primarily driven by loan growth and a dampened macroeconomic outlook and the nine-month period was driven by the same factors as well as a reserve build related to Russian exposure, partially offset by asset quality improvement and reduced COVID-19 pandemic uncertainties.
Outstanding loans and leases excluding loans accounted for under the fair value option increased $4.9 billion during the nine months ended September 30, 2023 driven by consumer loans, which increased $2.5 billion driven by credit card, partially offset by declines in securities-based lending. Commercial loans increased $2.4 billion driven by broad-based growth.
The changes in the allowance for credit losses, including net charge-offs and provision for loan and lease losses, are detailed in the following table.
Bank of America 78
Consumer Real Estate
Credit Card and Other Consumer
Commercial
Total
(Dollars in millions)
Three Months Ended September 30, 2023
Allowance for loan and lease losses, July 1
$
427
$
7,323
$
5,200
$
12,950
Loans and leases charged off
(15)
(994)
(178)
(1,187)
Recoveries of loans and leases previously charged off
27
178
51
256
Net charge-offs
12
(816)
(127)
(931)
Provision for loan and lease losses
(28)
1,247
49
1,268
Other
1
1
(2)
—
Allowance for loan and lease losses, September 30
412
7,755
5,120
13,287
Reserve for unfunded lending commitments, July 1
86
—
1,302
1,388
Provision for unfunded lending commitments
(1)
—
(33)
(34)
Other
—
—
(1)
(1)
Reserve for unfunded lending commitments, September 30
85
—
1,268
1,353
Allowance for credit losses, September 30
$
497
$
7,755
$
6,388
$
14,640
Three Months Ended September 30, 2022
Allowance for loan and lease losses, July 1
$
396
$
6,216
$
5,361
$
11,973
Loans and leases charged off
(13)
(696)
(100)
(809)
Recoveries of loans and leases previously charged off
34
216
39
289
Net charge-offs
21
(480)
(61)
(520)
Provision for loan and lease losses
(37)
760
122
845
Other
4
—
—
4
Allowance for loan and lease losses, September 30
384
6,496
5,422
12,302
Reserve for unfunded lending commitments, July 1
79
—
1,382
1,461
Provision for unfunded lending commitments
(1)
—
54
53
Other
—
—
1
1
Reserve for unfunded lending commitments, September 30
78
—
1,437
1,515
Allowance for credit losses, September 30
$
462
$
6,496
$
6,859
$
13,817
(Dollars in millions)
Nine Months Ended September 30, 2023
Allowance for loan and lease losses, December 31
$
420
$
6,817
$
5,445
$
12,682
January 1, 2023 adoption of credit loss standard
(67)
(109)
(67)
(243)
Allowance for loan and lease losses, January 1
353
6,708
5,378
12,439
Loans and leases charged off
(44)
(2,779)
(544)
(3,367)
Recoveries of loans and leases previously charged off
81
565
114
760
Net charge-offs
37
(2,214)
(430)
(2,607)
Provision for loan and lease losses
14
3,259
204
3,477
Other
8
2
(32)
(22)
Allowance for loan and lease losses, September 30
412
7,755
5,120
13,287
Reserve for unfunded lending commitments, January 1
94
—
1,446
1,540
Provision for unfunded lending commitments
(9)
—
(178)
(187)
Reserve for unfunded lending commitments, September 30
85
—
1,268
1,353
Allowance for credit losses, September 30
$
497
$
7,755
$
6,388
$
14,640
Nine Months Ended September 30, 2022
Allowance for loan and lease losses, January 1
$
557
$
6,476
$
5,354
$
12,387
Loans and leases charged off
(196)
(2,007)
(284)
(2,487)
Recoveries of loans and leases previously charged off
195
684
125
1,004
Net charge-offs
(1)
(1,323)
(159)
(1,483)
Provision for loan and lease losses
(179)
1,344
229
1,394
Other
7
(1)
(2)
4
Allowance for loan and lease losses, September 30
384
6,496
5,422
12,302
Reserve for unfunded lending commitments, January 1
96
—
1,360
1,456
Provision for unfunded lending commitments
(18)
—
75
57
Other
—
—
2
2
Reserve for unfunded lending commitments, September 30
78
—
1,437
1,515
Allowance for credit losses, September 30
$
462
$
6,496
$
6,859
$
13,817
NOTE 6Securitizations and Other Variable Interest Entities
The Corporation utilizes VIEs in the ordinary course of business to support its own and its customers’ financing and investing needs. The tables in this Note present the assets and liabilities of consolidated and unconsolidated VIEs at September 30, 2023 and December 31, 2022 in situations where the Corporation has continuing involvement with transferred assets or if the Corporation otherwise has a variable interest in the VIE. The tables also present the Corporation’s maximum loss
exposure at September 30, 2023 and December 31, 2022 resulting from its involvement with consolidated VIEs and unconsolidated VIEs in which the Corporation holds a variable interest. For more information on the Corporation’s use of VIEs and related maximum loss exposure, see Note 1 – Summary of Significant Accounting Principles and Note 6 – Securitizations and Other Variable Interest Entities to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K.
The Corporation invests in ABS issued by third-party VIEs with which it has no other form of involvement and enters into
79Bank of America
certain commercial lending arrangements that may also incorporate the use of VIEs, for example to hold collateral.
These securities and loans are included in Note 4 – Securities or Note 5 – Outstanding Loans and Leases and Allowance for Credit Losses. In addition, the Corporation has used VIEs in connection with its funding activities.
The Corporation did not provide financial support to consolidated or unconsolidated VIEs during the three and nine months ended September 30, 2023 or the year ended December 31, 2022 that it was not previously contractually required to provide, nor does it intend to do so.
The Corporation had liquidity commitments, including written put options and collateral value guarantees, with certain
unconsolidated VIEs of $950 million and $978 million at September 30, 2023 and December 31, 2022.
First-lien Mortgage Securitizations
As part of its mortgage banking activities, the Corporation securitizes a portion of the first-lien residential mortgage loans it originates or purchases from third parties. Except as described in Note 10 – Commitments and Contingencies, the Corporation does not provide guarantees or recourse to the securitization trusts other than standard representations and warranties.
The table below summarizes select information related to first-lien mortgage securitizations for the three and nine months ended September 30, 2023 and 2022.
First-lien Mortgage Securitizations
Residential Mortgage - Agency
Commercial Mortgage
Three Months Ended September 30
Nine Months Ended September 30
Three Months Ended September 30
Nine Months Ended September 30
(Dollars in millions)
2023
2022
2023
2022
2023
2022
2023
2022
Proceeds from loan sales (1)
$
1,220
$
3,259
$
3,475
$
7,000
$
1,167
$
779
$
1,764
$
5,194
Gains on securitizations (2)
(2)
—
(6)
8
33
13
35
39
Repurchases from securitization trusts (3)
10
21
24
46
—
—
—
—
(1)The Corporation transfers residential mortgage loans to securitizations sponsored primarily by the government-sponsored enterprises or Government National Mortgage Association (GNMA) in the normal course of business and primarily receives residential mortgage-backed securities in exchange. Substantially all of these securities are classified as Level 2 within the fair value hierarchy and are typically sold shortly after receipt.
(2)A majority of the first-lien residential mortgage loans securitized are initially classified as LHFS and accounted for under the fair value option. Gains recognized on these LHFS prior to securitization, which totaled $17 million and $34 million net of hedges, during the three and nine months ended September 30, 2023 compared to $5 million and $35 million for the same periods in 2022, are not included in the table above.
(3)The Corporation may have the option to repurchase delinquent loans out of securitization trusts, which reduces the amount of servicing advances it is required to make. The Corporation may also repurchase loans from securitization trusts to perform modifications. Repurchased loans include FHA-insured mortgages collateralizing GNMA securities.
The Corporation recognizes consumer MSRs from the sale or securitization of consumer real estate loans. The unpaid principal balance of loans serviced for investors, including residential mortgage and home equity loans, totaled $93.5 billion and $102.6 billion at September 30, 2023 and 2022. Servicing fee and ancillary fee income on serviced loans was $55 million and $187 million during the three and nine months ended September 30, 2023 compared to $71 million and $215 million for the same periods in 2022. Servicing advances on serviced loans, including loans serviced for others and loans held for investment, were $1.3 billion and $1.6 billion at
September 30, 2023 and December 31, 2022. For more information on MSRs, see Note 14 – Fair Value Measurements.
During the three and nine months ended September 30, 2023, the Corporation deconsolidated agency residential mortgage securitization trusts with total assets of $35 million and $659 million compared to $22 million and $585 million for the same periods in 2022.
The following table summarizes select information related to first-lien mortgage securitization trusts in which the Corporation held a variable interest at September 30, 2023 and December 31, 2022.
Bank of America 80
First-lien Mortgage VIEs
Residential Mortgage
Non-agency
Agency
Prime
Subprime
Alt-A
Commercial Mortgage
(Dollars in millions)
Sep 30 2023
Dec 31 2022
Sep 30 2023
Dec 31 2022
Sep 30 2023
Dec 31 2022
Sep 30 2023
Dec 31 2022
Sep 30 2023
Dec 31 2022
Unconsolidated VIEs
Maximum loss exposure (1)
$
8,280
$
9,112
$
83
$
91
$
655
$
735
$
9
$
28
$
1,461
$
1,594
On-balance sheet assets
Senior securities:
Trading account assets
$
284
$
232
$
4
$
3
$
20
$
25
$
7
$
26
$
17
$
91
Debt securities carried at fair value
2,482
3,027
—
—
342
410
—
—
—
—
Held-to-maturity securities
5,514
5,853
—
—
—
—
—
—
1,293
1,268
All other assets
—
—
2
3
22
25
2
2
45
101
Total retained positions
$
8,280
$
9,112
$
6
$
6
$
384
$
460
$
9
$
28
$
1,355
$
1,460
Principal balance outstanding (2)
$
76,572
$
81,644
$
3,589
$
3,973
$
4,600
$
5,034
$
10,650
$
11,568
$
81,080
$
85,101
Consolidated VIEs
Maximum loss exposure (1)
$
1,914
$
1,735
$
—
$
—
$
—
$
78
$
—
$
—
$
—
$
—
On-balance sheet assets
Trading account assets
$
1,914
$
1,735
$
—
$
—
$
—
$
78
$
—
$
—
$
—
$
—
Loans and leases, net
—
—
—
—
—
—
—
—
—
—
Total assets
$
1,914
$
1,735
$
—
$
—
$
—
$
78
$
—
$
—
$
—
$
—
Total liabilities
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
(1)Maximum loss exposure includes obligations under loss-sharing reinsurance and other arrangements for non-agency residential mortgage and commercial mortgage securitizations, but excludes the reserve for representations and warranties obligations and corporate guarantees and also excludes servicing advances and other servicing rights and obligations. For more information, see Note 10 – Commitments and Contingencies and Note 14 – Fair Value Measurements.
(2)Principal balance outstanding includes loans where the Corporation was the transferor to securitization VIEs with which it has continuing involvement, which may include servicing the loans.
Other Asset-backed Securitizations
The table below summarizes select information related to home equity, credit card and other asset-backed VIEs in which the Corporation held a variable interest at September 30, 2023 and December 31, 2022.
Home Equity Loan, Credit Card and Other Asset-backed VIEs
Home Equity (1)
Credit Card and Automobile (2)
Resecuritization Trusts
Municipal Bond Trusts
(Dollars in millions)
Sep 30 2023
Dec 31 2022
Sep 30 2023
Dec 31 2022
Sep 30 2023
Dec 31 2022
Sep 30 2023
Dec 31 2022
Unconsolidated VIEs
Maximum loss exposure
$
—
$
119
$
—
$
—
$
4,683
$
4,243
$
2,030
$
2,537
On-balance sheet assets
Securities (3):
Trading account assets
$
—
$
—
$
—
$
—
$
1,465
$
456
$
—
$
—
Debt securities carried at fair value
—
1
—
—
916
1,259
—
—
Held-to-maturity securities
—
—
—
—
2,302
2,528
—
—
Total retained positions
$
—
$
1
$
—
$
—
$
4,683
$
4,243
$
—
$
—
Total assets of VIEs
$
264
$
326
$
—
$
—
$
18,187
$
12,255
$
2,486
$
3,016
Consolidated VIEs
Maximum loss exposure
$
13
$
32
$
8,361
$
9,555
$
119
$
551
$
2,121
$
—
On-balance sheet assets
Trading account assets
$
—
$
—
$
—
$
—
$
291
$
650
$
2,071
$
—
Debt securities carried at fair value
—
—
—
—
—
—
50
—
Loans and leases
34
97
15,233
14,555
—
—
—
—
Allowance for loan and lease losses
7
12
(815)
(808)
—
—
—
—
All other assets
1
2
111
68
—
—
—
—
Total assets
$
42
$
111
$
14,529
$
13,815
$
291
$
650
$
2,121
$
—
On-balance sheet liabilities
Short-term borrowings
$
—
$
—
$
—
$
—
$
—
$
—
$
2,036
$
—
Long-term debt
29
79
6,156
4,247
172
99
—
—
All other liabilities
—
—
12
13
—
—
—
—
Total liabilities
$
29
$
79
$
6,168
$
4,260
$
172
$
99
$
2,036
$
—
(1)For unconsolidated home equity loan VIEs, the maximum loss exposure includes outstanding trust certificates issued by trusts in rapid amortization, net of recorded reserves. For both consolidated and unconsolidated home equity loan VIEs, the maximum loss exposure excludes the reserve for representations and warranties obligations and corporate guarantees. For more information, see Note 10 – Commitments and Contingencies.
(2)At September 30, 2023 and December 31, 2022, loans and leases in the consolidated credit card trust included $3.6 billion and $3.3 billion of seller’s interest.
(3)The retained senior securities were valued using quoted market prices or observable market inputs (Level 2 of the fair value hierarchy).
Home Equity Loans
The Corporation retains interests, primarily senior securities, in home equity securitization trusts to which it transferred home equity loans. In addition, the Corporation may be obligated to provide subordinate funding to the trusts during a rapid amortization event. This obligation is included in the maximum
loss exposure in the preceding table. The charges that will ultimately be recorded as a result of the rapid amortization events depend on the undrawn portion of the home equity lines of credit, performance of the loans, the amount of subsequent draws and the timing of related cash flows.
81Bank of America
Credit Card and Automobile Loan Securitizations
The Corporation securitizes originated and purchased credit card and automobile loans as a source of financing. The loans are sold on a non-recourse basis to consolidated trusts. The securitizations are ongoing, whereas additional receivables will be funded into the trusts by either loan repayments or proceeds from securities issued to third parties, depending on the securitization structure. The Corporation’s continuing involvement with the securitization trusts includes servicing the receivables and holding various subordinated interests, including an undivided seller’s interest in the credit card receivables and owning certain retained interests.
At September 30, 2023 and 2022, the carrying values of the receivables in the trusts totaled $15.2 billion and $14.0 billion, which are included in loans and leases, and the carrying values of senior debt securities that were issued to third-party investors from the trusts totaled $6.2 billion and $3.0 billion, which are included in long-term debt.
Resecuritization Trusts
The Corporation transfers securities, typically MBS, into resecuritization VIEs generally at the request of customers seeking securities with specific characteristics. Generally, there are no significant ongoing activities performed in a resecuritization trust, and no single investor has the unilateral ability to liquidate the trust.
The Corporation resecuritized $1.8 billion and $7.6 billion of securities during the three and nine months ended September 30, 2023 compared to $5.3 billion and $19.5 billion for the same periods in 2022. Securities transferred into resecuritization VIEs were measured at fair value with changes
in fair value recorded in market making and similar activities prior to the resecuritization and, accordingly, no gain or loss on sale was recorded. During the three and nine months ended September 30, 2023 and 2022, resecuritization proceeds included securities with an initial fair value of $1.1 billion and $2.1 billion compared to $670 million and $2.4 billion, of which substantially all of the securities were classified as trading account assets for both periods. Substantially all of the trading account securities carried at fair value were categorized as Level 2 within the fair value hierarchy.
Municipal Bond Trusts
The Corporation administers municipal bond trusts that hold highly-rated, long-term, fixed-rate municipal bonds. The trusts obtain financing by issuing floating-rate trust certificates that reprice on a weekly or other short-term basis to third-party investors.
The Corporation’s liquidity commitments to unconsolidated municipal bond trusts, including those for which the Corporation was transferor, totaled $2.0 billion and $2.5 billion at September 30, 2023 and December 31, 2022. The weighted-average remaining life of bonds held in the trusts at September 30, 2023 was 12.3 years. There were no significant write-downs or downgrades of assets or issuers during the nine months ended September 30, 2023 and 2022.
Other Variable Interest Entities
The table below summarizes select information related to other VIEs in which the Corporation held a variable interest at September 30, 2023 and December 31, 2022.
Other VIEs
Consolidated
Unconsolidated
Total
Consolidated
Unconsolidated (1)
Total (1)
(Dollars in millions)
September 30, 2023
December 31, 2022
Maximum loss exposure
$
1,840
$
47,375
$
49,215
$
2,286
$
47,477
$
49,763
On-balance sheet assets
Trading account assets
$
378
$
2,183
$
2,561
$
353
$
2,187
$
2,540
Debt securities carried at fair value
—
125
125
—
473
473
Loans and leases
1,635
14,447
16,082
2,086
14,243
16,329
Allowance for loan and lease losses
(1)
(71)
(72)
(1)
(99)
(100)
All other assets
60
30,164
30,224
46
30,221
30,267
Total
$
2,072
$
46,848
$
48,920
$
2,484
$
47,025
$
49,509
On-balance sheet liabilities
Short-term borrowings
$
23
$
—
$
23
$
42
$
—
$
42
Long-term debt
209
—
209
156
—
156
All other liabilities
—
7,104
7,104
—
7,318
7,318
Total
$
232
$
7,104
$
7,336
$
198
$
7,318
$
7,516
(1)Prior period has been revised to include unconsolidated CLOs.
Customer VIEs
Customer VIEs include credit-linked, equity-linked and commodity-linked note VIEs, repackaging VIEs and asset acquisition VIEs, which are typically created on behalf of customers who wish to obtain market or credit exposure to a specific company, index, commodity or financial instrument.
The Corporation’s involvement in the VIE is limited to its loss exposure. The Corporation’s maximum loss exposure to consolidated and unconsolidated customer VIEs totaled $832 million and $914 million at September 30, 2023 and December 31, 2022, including the notional amount of derivatives to which the Corporation is a counterparty, net of losses previously recorded, and the Corporation’s investment, if any, in securities issued by the VIEs. Total assets of the consolidated and unconsolidated VIEs were $1.5 billion at both September 30, 2023 and December 31, 2022.
CDO and CLO VIEs
The Corporation holds investments in unconsolidated CDO and CLO VIEs, that hold diversified pools of fixed-income securities, typically corporate debt, ABS or non-investment grade corporate loans, which are funded by multiple tranches of debt instruments and equity securities issued by the VIEs. The VIEs are managed by third-party portfolio managers. The Corporation held $16.2 billion and $16.3 billion of loans and securities issued by CDO and CLO VIEs at September 30, 2023 and December 31, 2022. The Corporation’s loss exposure is limited to its loan and debt security holdings and the notional amount of any derivatives to which the Corporation is a counterparty. The Corporation’s maximum loss exposure to consolidated and unconsolidated CDOs and CLOs totaled $16.3 billion at both September 30, 2023 and December 31, 2022, which is insignificant to the total assets of the VIEs.
Bank of America 82
Investment VIEs
The Corporation sponsors, invests in or provides financing, which may be in connection with the sale of assets, to a variety of investment VIEs that hold loans, real estate, debt securities or other financial instruments and are designed to provide the desired investment profile to investors or the Corporation. At September 30, 2023 and December 31, 2022, the Corporation’s consolidated investment VIEs had total assets of $471 million and $854 million. The Corporation also held investments in unconsolidated VIEs with total assets of $15.4 billion and $12.2 billion at September 30, 2023 and December 31, 2022. The Corporation’s maximum loss exposure associated with both consolidated and unconsolidated investment VIEs totaled $1.8 billion and $2.4 billion at September 30, 2023 and December 31, 2022 comprised primarily of on-balance sheet assets less non-recourse liabilities.
Leveraged Lease Trusts
The Corporation’s net investment in consolidated leveraged lease trusts totaled $1.2 billion at both September 30, 2023 and December 31, 2022. The trusts hold long-lived equipment such as rail cars, power generation and distribution equipment, and commercial aircraft. The Corporation structures the trusts and holds a significant residual interest. The net investment represents the Corporation’s maximum loss exposure to the trusts in the unlikely event that the leveraged lease investments become worthless. Debt issued by the leveraged lease trusts is non-recourse to the Corporation.
Tax Credit VIEs
The Corporation holds equity investments in unconsolidated limited partnerships and similar entities that construct, own and operate affordable housing, renewable energy and certain other projects. The total assets of these unconsolidated tax credit VIEs were $81.7 billion and $74.8 billion as of September 30, 2023 and December 31, 2022. An unrelated third party is typically the general partner or managing member and has control over the significant activities of the VIE. As an investor, tax credits associated with the investments in these entities are allocated to the Corporation, as provided by the U.S. Internal Revenue Code and related regulations, and are recognized as income tax benefits in the Corporation’s Consolidated Statement of Income in the year they are earned, which varies based on the type of investments. Tax credits from
environmental, social and governance investments in affordable housing are recognized ratably over a term of up to 10 years, and tax credits from renewable energy investments are recognized either at inception for transactions electing Investment Tax Credits (ITCs) or as energy is produced for transactions electing Production Tax Credits (PTCs), which is generally up to a 10-year time period. The volume and types of investments held by the Corporation will influence the amount of tax credits recognized each period.
The Corporation’s equity investments in affordable housing and other projects totaled $14.9 billion and $14.7 billion at September 30, 2023 and December 31, 2022, which included unfunded capital contributions of $6.8 billion and $6.9 billion and are probable to be paid over the next five years. The Corporation may be asked to invest additional amounts to support a troubled affordable housing project. Such additional investments have not been and are not expected to be significant. During the three and nine months ended September 30, 2023, the Corporation recognized tax credits and other tax benefits related to affordable housing and other tax credit equity investments of $526 million and $1.6 billion compared to $457 million and $1.3 billion for the same periods in 2022, and reported pretax losses in other income of $379 million and $1.1 billion compared to $350 million and $1.0 billion for the same periods in 2022. The Corporation’s equity investments in renewable energy totaled $13.9 billion at both September 30, 2023 and December 31, 2022. In addition, the Corporation had unfunded capital contributions for renewable energy investments of $6.5 billion and $1.9 billion at September 30, 2023 and December 31, 2022, which are contingent on various conditions precedent to funding over the next two years. The Corporation’s risk of loss is generally mitigated by policies requiring the project to qualify for the expected tax credits prior to making its investment. During the three and nine months ended September 30, 2023, the Corporation recognized tax credits and other tax benefits related to renewable energy equity investments of $1.3 billion and $3.4 billion compared to $527 million and $2.0 billion for the same periods in 2022 and reported pretax losses in other income of $849 million and $2.0 billion compared to $337 million and $1.4 billion for the same periods in 2022. The Corporation may also enter into power purchase agreements with renewable energy tax credit entities. The maximum loss exposure for tax credit VIEs was $28.8 billion at both September 30, 2023 and December 31, 2022.
83Bank of America
NOTE 7 Goodwill and Intangible Assets
Goodwill
The table below presents goodwill balances by business segment at September 30, 2023 and December 31, 2022. The reporting units utilized for goodwill impairment testing are the operating segments or one level below.
Goodwill
(Dollars in millions)
September 30 2023
December 31 2022
Consumer Banking
$
30,137
$
30,137
Global Wealth & Investment Management
9,677
9,677
Global Banking
24,026
24,026
Global Markets
5,181
5,182
Total goodwill
$
69,021
$
69,022
Intangible Assets
At September 30, 2023 and December 31, 2022, the net carrying value of intangible assets was $2.0 billion and $2.1 billion. At both September 30, 2023 and December 31, 2022, intangible assets included $1.6 billion of intangible assets associated with trade names, substantially all of which had an indefinite life and, accordingly, are not being amortized. Amortization of intangibles expense was $20 million for both the three months ended September 30, 2023 and 2022 and $59 million for both the nine months ended September 30, 2023 and 2022.
NOTE 8 Leases
The Corporation enters into both lessor and lessee arrangements. For more information on lease accounting, see Note 1 – Summary of Significant Accounting Principles and Note 8 – Leasesto the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K. For more information on lease financing receivables, see Note 5 – Outstanding Loans and Leases and Allowance for Credit Losses.
Lessor Arrangements
The Corporation’s lessor arrangements primarily consist of operating, sales-type and direct financing leases for equipment. Lease agreements may include options to renew and for the lessee to purchase the leased equipment at the end of the lease term.
The table below presents the net investment in sales-type and direct financing leases at September 30, 2023 and December 31, 2022.
Net Investment (1)
(Dollars in millions)
September 30 2023
December 31 2022
Lease receivables
$
15,580
$
15,123
Unguaranteed residuals
2,291
2,143
Total net investment in sales-type and direct financing leases
$
17,871
$
17,266
(1)In certain cases, the Corporation obtains third-party residual value insurance to reduce its residual asset risk. The carrying value of residual assets with third-party residual value insurance for at least a portion of the asset value was $6.6 billion and $6.5 billion at September 30, 2023 and December 31, 2022.
The table below presents lease income for the three and nine months ended September 30, 2023 and 2022.
Lease Income
Three Months Ended September 30
Nine Months Ended September 30
(Dollars in millions)
2023
2022
2023
2022
Sales-type and direct financing leases
$
206
$
149
$
559
$
428
Operating leases
233
241
705
704
Total lease income
$
439
$
390
$
1,264
$
1,132
Lessee Arrangements
The Corporation's lessee arrangements predominantly consist of operating leases for premises and equipment; the Corporation's financing leases are not significant.
The table below provides information on the right-of-use assets and lease liabilities at September 30, 2023 and December 31, 2022.
Lessee Arrangements
(Dollars in millions)
September 30 2023
December 31 2022
Right-of-use asset
$
9,187
$
9,755
Lease liabilities
9,799
10,359
Bank of America 84
NOTE 9 Securities Financing Agreements, Collateral and Restricted Cash
The Corporation enters into securities financing agreements which include securities borrowed or purchased under agreements to resell and securities loaned or sold under agreements to repurchase. These financing agreements (also referred to as “matched-book transactions”) are to accommodate customers, obtain securities to cover short positions and finance inventory positions. The Corporation elects to account for certain securities financing agreements under the fair value option. For more information on the fair value option, see Note 15 – Fair Value Option.
Offsetting of Securities Financing Agreements
The Securities Financing Agreements table presents securities financing agreements included on the Consolidated Balance
Sheet in federal funds sold and securities borrowed or purchased under agreements to resell, and in federal funds purchased and securities loaned or sold under agreements to repurchase at September 30, 2023 and December 31, 2022. Balances are presented on a gross basis, prior to the application of counterparty netting. Gross assets and liabilities are adjusted on an aggregate basis to take into consideration the effects of legally enforceable master netting agreements. For more information on the offsetting of derivatives, see Note 3 – Derivatives. For more information on the securities financing agreements and the offsetting of securities financing transactions, see Note 10 – Securities Financing Agreements, Short-term Borrowings, Collateral and Restricted Cash to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K.
Securities Financing Agreements
Gross Assets/Liabilities (1)
Amounts Offset
Net Balance Sheet Amount
Financial Instruments (2)
Net Assets/Liabilities
(Dollars in millions)
September 30, 2023
Securities borrowed or purchased under agreements to resell (3)
$
651,337
$
(342,088)
$
309,249
$
(283,835)
$
25,414
Securities loaned or sold under agreements to repurchase
$
642,791
$
(342,088)
$
300,703
$
(285,522)
$
15,181
Other (4)
8,304
—
8,304
(8,304)
—
Total
$
651,095
$
(342,088)
$
309,007
$
(293,826)
$
15,181
December 31, 2022
Securities borrowed or purchased under agreements to resell (3)
$
597,847
$
(330,273)
$
267,574
$
(240,120)
$
27,454
Securities loaned or sold under agreements to repurchase
$
525,908
$
(330,273)
$
195,635
$
(183,265)
$
12,370
Other (4)
8,427
—
8,427
(8,427)
—
Total
$
534,335
$
(330,273)
$
204,062
$
(191,692)
$
12,370
(1)Includes activity where uncertainty exists as to the enforceability of certain master netting agreements under bankruptcy laws in some countries or industries.
(2)Includes securities collateral received or pledged under repurchase or securities lending agreements where there is a legally enforceable master netting agreement. These amounts are not offset on the Consolidated Balance Sheet, but are shown as a reduction to derive a net asset or liability. Securities collateral received or pledged where the legal enforceability of the master netting agreements is uncertain is excluded from the table.
(3)Excludes repurchase activity of $8.6 billion and $8.7 billion reported in loans and leases on the Consolidated Balance Sheet at September 30, 2023 and December 31, 2022.
(4)Balance is reported in accrued expenses and other liabilities on the Consolidated Balance Sheet and relates to transactions where the Corporation acts as the lender in a securities lending agreement and receives securities that can be pledged as collateral or sold. In these transactions, the Corporation recognizes an asset at fair value, representing the securities received, and a liability, representing the obligation to return those securities.
Repurchase Agreements and Securities Loaned Transactions Accounted for as Secured Borrowings
The following tables present securities sold under agreements to repurchase and securities loaned by remaining contractual term to maturity and class of collateral pledged. Included in “Other” are transactions where the Corporation acts as the lender in a securities lending agreement and receives securities that can be pledged as collateral or sold. Certain agreements contain a right to substitute collateral and/or terminate the
agreement prior to maturity at the option of the Corporation or the counterparty. Such agreements are included in the table below based on the remaining contractual term to maturity. For more information on collateral requirements, see Note 10 – Securities Financing Agreements, Short-term Borrowings, Collateral and Restricted Cash to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K.
Remaining Contractual Maturity
Overnight and Continuous
30 Days or Less
After 30 Days Through 90 Days
Greater than
90 Days (1)
Total
(Dollars in millions)
September 30, 2023
Securities sold under agreements to repurchase
$
257,669
$
167,947
$
78,648
$
58,853
$
563,117
Securities loaned
74,247
152
971
4,304
79,674
Other
8,304
—
—
—
8,304
Total
$
340,220
$
168,099
$
79,619
$
63,157
$
651,095
December 31, 2022
Securities sold under agreements to repurchase
$
200,087
$
181,632
$
41,666
$
30,107
$
453,492
Securities loaned
66,909
288
1,139
4,080
72,416
Other
8,427
—
—
—
8,427
Total
$
275,423
$
181,920
$
42,805
$
34,187
$
534,335
(1)No agreements have maturities greater than four years.
85Bank of America
Class of Collateral Pledged
Securities Sold Under Agreements to Repurchase
Securities Loaned
Other
Total
(Dollars in millions)
September 30, 2023
U.S. government and agency securities
$
310,064
$
—
$
20
$
310,084
Corporate securities, trading loans and other
20,488
778
7
21,273
Equity securities
7,410
78,896
8,260
94,566
Non-U.S. sovereign debt
220,382
—
17
220,399
Mortgage trading loans and ABS
4,773
—
—
4,773
Total
$
563,117
$
79,674
$
8,304
$
651,095
December 31, 2022
U.S. government and agency securities
$
193,005
$
18
$
—
$
193,023
Corporate securities, trading loans and other
14,345
2,896
317
17,558
Equity securities
10,249
69,432
8,110
87,791
Non-U.S. sovereign debt
232,171
70
—
232,241
Mortgage trading loans and ABS
3,722
—
—
3,722
Total
$
453,492
$
72,416
$
8,427
$
534,335
Collateral
The Corporation accepts securities and loans as collateral that it is permitted by contract or practice to sell or repledge. At September 30, 2023 and December 31, 2022, the fair value of this collateral was $852.7 billion and $827.6 billion, of which $820.9 billion and $764.1 billion was sold or repledged. The primary source of this collateral is securities borrowed or purchased under agreements to resell. For more information on collateral, see Note 10 – Securities Financing Agreements, Short-term Borrowings, Collateral and Restricted Cash to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K.
Restricted Cash
At September 30, 2023 and December 31, 2022, the Corporation held restricted cash included within cash and cash equivalents on the Consolidated Balance Sheet of $6.1 billion and $7.6 billion, predominantly related to cash segregated in compliance with securities regulations and cash held on deposit with central banks to meet reserve requirements.
NOTE 10 Commitments and Contingencies
In the normal course of business, the Corporation enters into a number of off-balance sheet commitments. These commitments expose the Corporation to varying degrees of credit and market risk and are subject to the same credit and market risk limitation reviews as those instruments recorded on the Consolidated Balance Sheet. For more information on commitments and contingencies, see Note 12 – Commitments and Contingencies to the Consolidated Financial Statementsof the Corporation’s 2022 Annual Report on Form 10-K.
Credit Extension Commitments
The Corporation enters into commitments to extend credit such as loan commitments, standby letters of credit (SBLCs) and commercial letters of credit to meet the financing needs of its customers. The following table includes the notional amount of unfunded legally binding lending commitments net of amounts distributed (i.e., syndicated or participated) to other financial institutions. The distributed amounts were $10.6 billion and $10.4 billion at September 30, 2023 and December 31, 2022. The carrying value of the Corporation’s credit extension commitments at September 30, 2023 and December 31, 2022, excluding commitments accounted for under the fair value option, was $1.4 billion and $1.6 billion, which predominantly related to the reserve for unfunded lending commitments. The carrying value of these commitments is classified in accrued expenses and other liabilities on the Consolidated Balance Sheet.
Legally binding commitments to extend credit generally have specified rates and maturities. Certain of these commitments have adverse change clauses that help to protect the Corporation against deterioration in the borrower’s ability to pay.
The following table includes the notional amount of commitments of $1.8 billion and $3.0 billion at September 30, 2023 and December 31, 2022 that are accounted for under the fair value option. However, the table excludes the cumulative net fair value for these commitments of $62 million and $110 million at September 30, 2023 and December 31, 2022, which is classified in accrued expenses and other liabilities. For more information regarding the Corporation’s loan commitments accounted for under the fair value option, see Note 15 – Fair Value Option.
Bank of America 86
Credit Extension Commitments
Expire in One Year or Less
Expire After One Year Through Three Years
Expire After Three Years Through Five Years
Expire After Five Years
Total
(Dollars in millions)
September 30, 2023
Notional amount of credit extension commitments
Loan commitments (1)
$
127,520
$
182,325
$
206,569
$
14,204
$
530,618
Home equity lines of credit
2,328
8,975
11,403
22,273
44,979
Standby letters of credit and financial guarantees (2)
21,131
9,821
2,691
505
34,148
Letters of credit
888
32
257
25
1,202
Other commitments (3)
5
46
118
1,056
1,225
Legally binding commitments
151,872
201,199
221,038
38,063
612,172
Credit card lines (4)
440,277
—
—
—
440,277
Total credit extension commitments
$
592,149
$
201,199
$
221,038
$
38,063
$
1,052,449
December 31, 2022
Notional amount of credit extension commitments
Loan commitments (1)
$
113,962
$
162,890
$
221,374
$
13,667
$
511,893
Home equity lines of credit
1,479
7,230
11,578
22,154
42,441
Standby letters of credit and financial guarantees (2)
22,565
9,237
2,787
628
35,217
Letters of credit
853
46
52
49
1,000
Other commitments (3)
5
93
71
1,103
1,272
Legally binding commitments
138,864
179,496
235,862
37,601
591,823
Credit card lines (4)
419,144
—
—
—
419,144
Total credit extension commitments
$
558,008
$
179,496
$
235,862
$
37,601
$
1,010,967
(1) At September 30, 2023 and December 31, 2022, $3.7 billion and $2.6 billion of these loan commitments were held in the form of a security.
(2) The notional amounts of SBLCs and financial guarantees classified as investment grade and non-investment grade based on the credit quality of the underlying reference name within the instrument were $23.6 billion and $9.8 billion at September 30, 2023, and $25.1 billion and $9.5 billion at December 31, 2022. Amounts in the table include consumer SBLCs of $714 million and $575 million at September 30, 2023 and December 31, 2022.
(3) Primarily includes second-loss positions on lease-end residual value guarantees.
(4) Includes business card unused lines of credit.
Other Commitments
At September 30, 2023 and December 31, 2022, the Corporation had commitments to purchase loans (e.g., residential mortgage and commercial real estate) of $788 million and $636 million, which upon settlement will be included in trading account assets, loans or LHFS, and commitments to purchase commercial loans of $452 million and $294 million, which upon settlement will be included in trading account assets.
At September 30, 2023 and December 31, 2022, the Corporation had commitments to enter into resale and forward-dated resale and securities borrowing agreements of $128.3 billion and $92.0 billion, and commitments to enter into forward-dated repurchase and securities lending agreements of $73.2 billion and $57.8 billion. A significant portion of these commitments will expire within the next 12 months.
At September 30, 2023 and December 31, 2022, the Corporation had a commitment to originate or purchase up to $4.0 billion and $3.7 billion on a rolling 12-month basis, of auto loans and leases from a strategic partner. This commitment extends through November 2026 and can be terminated with 12 months prior notice.
At September 30, 2023 and December 31, 2022, the Corporation had unfunded equity investment commitments of $900 million and $571 million.
As a Federal Reserve member bank, the Corporation is required to subscribe to a certain amount of shares issued by its Federal Reserve district bank, which pays cumulative dividends at a prescribed rate. As of September 30, 2023 and December 31, 2022, the Corporation paid $5.4 billion for half of its subscribed shares, with the remaining half subject to call by the Federal Reserve district bank board, which the Corporation believes is remote.
Other Guarantees
Bank-owned Life Insurance Book Value Protection
The Corporation sells products that offer book value protection to insurance carriers who offer group life insurance policies to corporations, primarily banks. At both September 30, 2023 and December 31, 2022, the notional amount of these guarantees totaled $4.3 billion. At both September 30, 2023 and December 31, 2022, the Corporation’s maximum exposure related to these guarantees totaled $632 million, with estimated maturity dates between 2033 and 2039.
Merchant Services
The Corporation in its role as merchant acquirer or as a sponsor of other merchant acquirers may be held liable for any reversed charges that cannot be collected from the merchants due to, among other things, merchant fraud or insolvency. If charges are properly reversed after a purchase and cannot be collected from either the merchants or merchant acquirers, the Corporation may be held liable for these reversed charges. The ability to reverse a charge is primarily governed by the applicable payment network rules and regulations, which include, but are not limited to, the type of charge, type of payment used and time limits. The total amount of transactions subject to reversal under payment network rules and regulations processed for the preceding six-month period, which was approximately $412 billion, is an estimate of the Corporation’s maximum potential exposure as of September 30, 2023. The Corporation’s risk in this area primarily relates to circumstances where a cardholder has purchased goods or services for future delivery. The Corporation mitigates this risk by requiring cash deposits, guarantees, letters of credit or other types of collateral from certain merchants. The Corporation’s reserves for contingent losses and the losses incurred related to the merchant processing activity were not significant.
87Bank of America
Representations and Warranties Obligations and Corporate Guarantees
For more information on representations and warranties obligations and corporate guarantees, see Note 12 – Commitments and Contingenciesto the Consolidated Financial Statementsof the Corporation’s 2022 Annual Report on Form 10-K.
The reserve for representations and warranties obligations and corporate guarantees was $621 million and $612 million at September 30, 2023 and December 31, 2022 and is included in accrued expenses and other liabilities on the Consolidated Balance Sheet, and the related provision is included in other income in the Consolidated Statement of Income. The representations and warranties reserve represents the Corporation’s best estimate of probable incurred losses, is based on its experience in previous negotiations, and is subject to judgment, a variety of assumptions, and known or unknown uncertainties. Future representations and warranties losses may occur in excess of the amounts recorded for these exposures; however, the Corporation does not expect such amounts to be material to the Corporation's financial condition and liquidity. See Litigation and Regulatory Matters below for the Corporation's combined range of possible loss in excess of the reserve for representations and warranties and the accrued liability for litigation.
Fixed Income Clearing Corporation Sponsored Member Repo Program
The Corporation acts as a sponsoring member in a repo program whereby the Corporation clears certain eligible resale and repurchase agreements through the Government Securities Division of the Fixed Income Clearing Corporation on behalf of clients that are sponsored members in accordance with the Fixed Income Clearing Corporation’s rules. As part of this program, the Corporation guarantees the payment and performance of its sponsored members to the Fixed Income Clearing Corporation. The Corporation’s guarantee obligation is secured by a security interest in cash or high-quality securities collateral placed by clients with the clearinghouse and therefore, the potential for the Corporation to incur significant losses under this arrangement is remote. The Corporation’s maximum potential exposure, without taking into consideration the related collateral, was $43.6 billion and $59.6 billion at September 30, 2023 and December 31, 2022.
Other Guarantees
In the normal course of business, the Corporation periodically guarantees the obligations of its affiliates in a variety of transactions including ISDA-related transactions and non-ISDA related transactions such as commodities trading, repurchase agreements, prime brokerage agreements and other transactions.
Guarantees of Certain Long-term Debt
The Corporation, as the parent company, fully and unconditionally guarantees the securities issued by BofA Finance LLC, a consolidated finance subsidiary of the Corporation, and effectively provides for the full and unconditional guarantee of trust securities and capital securities issued by certain statutory trust companies that are 100 percent owned finance subsidiaries of the Corporation.
Other Contingencies
On May 11, 2023, the Federal Deposit Insurance Corporation (FDIC) issued a proposed rule that would impose a special
assessment to recover the loss to the Deposit Insurance Fund arising from the protection of uninsured depositors of Silicon Valley Bank and Signature Bank associated with their closures, and the systemic risk determination announced by the FDIC on March 12, 2023. While the timing and amount of any expense recognition are unknown until the proposed rule is finalized, if the final rule is issued as proposed, the estimated impact of the special assessment on the Corporation would be
a noninterest expense of approximately $1.9 billion that would be recognized upon finalization of the rule, which could occur in the fourth quarter of 2023.
Litigation and Regulatory Matters
The following disclosures supplement the disclosure in Note 12 – Commitments and Contingenciesto the Consolidated Financial Statementsof the Corporation’s 2022 Annual Report on Form 10-K (the prior commitments and contingencies disclosure).
In the ordinary course of business, the Corporation and its subsidiaries are routinely defendants in or parties to many pending and threatened legal, regulatory and governmental actions and proceedings. In view of the inherent difficulty of predicting the outcome of such matters, particularly where the claimants seek very large or indeterminate damages or where the matters present novel legal theories or involve a large number of parties, the Corporation generally cannot predict the eventual outcome of the pending matters, timing of the ultimate resolution of these matters, or eventual loss, fines or penalties related to each pending matter.
As a matter develops, the Corporation, in conjunction with any outside counsel handling the matter, evaluates whether such matter presents a loss contingency that is probable and estimable, and, for the matters disclosed below and in the prior commitments and contingencies disclosure, whether a loss in excess of any accrued liability is reasonably possible in future periods. Once the loss contingency is deemed to be both probable and estimable, the Corporation will establish an accrued liability and record a corresponding amount of litigation-related expense. The Corporation continues to monitor the matter for further developments that could affect the amount of the accrued liability that has been previously established. Excluding expenses of internal and external legal service providers, litigation and regulatory investigation-related expense of $76 million and $442 million was recognized for the three and nine months ended September 30, 2023 compared to $507 million and $1.1 billion for the same periods in 2022.
For any matter disclosed in this Note and in the prior commitments and contingencies disclosure for which a loss in future periods is reasonably possible and estimable (whether in excess of an accrued liability or where there is no accrued liability) and for representations and warranties exposures, the Corporation’s estimated range of possible loss is $0 to $0.8 billion in excess of the accrued liability, if any, as of September 30, 2023.
The accrued liability and estimated range of possible loss are based upon currently available information and subject to significant judgment, a variety of assumptions and known and unknown uncertainties. The matters underlying the accrued liability and estimated range of possible loss are unpredictable and may change from time to time, and actual losses may vary significantly from the current estimate and accrual. The estimated range of possible loss does not represent the Corporation’s maximum loss exposure.
Information is provided below and in the prior commitments and contingencies disclosure regarding the nature of the litigation and, where specified, associated claimed damages.
Bank of America 88
Based on current knowledge, and taking into account accrued liabilities, management does not believe that loss contingencies arising from pending matters, including the matters described below and in the prior commitments and contingencies disclosure, will have a material adverse effect on the consolidated financial condition or liquidity of the Corporation. However, in light of the significant judgment, variety of assumptions and uncertainties involved in those matters, some of which are beyond the Corporation’s control, and the very large or indeterminate damages sought in some of those matters, an adverse outcome in one or more of those matters could be material to the Corporation’s business or results of operations for any particular reporting period, or cause significant reputational harm.
Deposit Insurance Assessment
On April 10, 2023, the magistrate judge issued a report and recommendation (the Report) for resolving the parties’ pending summary judgment motions. The Report recommends granting the FDIC motion for summary judgment on BANA’s statutory liability for the unpaid assessments, subject to BANA’s statute of limitations defenses to assessments for the quarters ended March 31, 2012 through March 31, 2013, on which the Report recommends that relevant issues should be resolved at trial. The Report also recommends denying BANA’s counterclaims challenging the adoption of the relevant assessment regulations and granting BANA’s motion for summary judgment on the FDIC’s claims for unjust enrichment and disgorgement. The Report has been submitted to the district court judge for consideration, and the parties have filed objections to the recommendations in the Report.
Representment Non-sufficient Fund Fees
On July 11, 2023, it was announced that BANA agreed to settle two separate proceedings with the Office of the Comptroller of the Currency (OCC) and Consumer Financial Protection Bureau (CFPB) related to BANA’s assessing overdraft or insufficient funds fees each time a merchant resubmitted a transaction or check for payment after it had been declined due to insufficient funds (Representment Fees). Without admitting or denying the findings, BANA consented to orders requiring it to pay penalties of $60 million to each of the OCC and CFPB. Under the CFPB Consent Order, among other things, BANA also consented to refund at least $80 million to customers who were assessed Representment Fees between September 1, 2018 to February 18, 2022.
Credit Card Sales and Marketing Practices
On July 11, 2023, it was announced that BANA agreed to a settlement with the CFPB related to online advertisements concerning bonuses linked to rewards credit cards and failure to provide those bonuses to certain consumers, and applying for and opening credit cards for consumers without their consent and obtaining credit reports for those consumers. Without admitting or denying the findings, BANA agreed to the entry of a Consent Order requiring payment of a $30 million penalty and certain undertakings concerning consumer redress.
Unemployment Insurance Prepaid Cards
BANA has been named as a defendant in a number of putative class action, mass action, and individual lawsuits in multiple states related to its administration of prepaid debit cards to distribute unemployment and other state benefits. These lawsuits generally assert claims for monetary damages and injunctive relief. Class action and mass action lawsuits related to the California program, the largest program administered by BANA measured by total benefits and number of participants, have been consolidated into a multidistrict litigation (MDL) in the U.S. District Court for the Southern District of California. On May 25, 2023, the court dismissed certain of the claims in the MDL while allowing others to proceed, and plaintiffs subsequently filed an amended complaint. BANA filed a partial motion to dismiss certain of the remaining claims in the amended complaint in the MDL, which is currently pending.
NOTE 11Shareholders’ Equity
Common Stock
Declared Quarterly Cash Dividends on Common Stock (1)
Declaration Date
Record Date
Payment Date
Dividend Per Share
October 18, 2023
December 1, 2023
December 29, 2023
$
0.24
July 19, 2023
September 1, 2023
September 29, 2023
0.24
April 26, 2023
June 2, 2023
June 30, 2023
0.22
February 1, 2023
March 3, 2023
March 31, 2023
0.22
(1) In 2023, and through October 31, 2023.
During the three and nine months ended September 30, 2023, the Corporation repurchased and retired 33 million and 119 million shares of common stock, which reduced shareholders’ equity by $1.0 billion and $3.8 billion.
During the nine months ended September 30, 2023, in connection with employee stock plans, the Corporation issued 73 million shares of its common stock and, to satisfy tax withholding obligations, repurchased 28 million shares of its common stock. At September 30, 2023, the Corporation had reserved 496 million unissued shares of common stock for future issuances under employee stock plans, convertible notes and preferred stock.
On October 18, 2023, the Board of Directors declared a quarterly common stock dividend of $0.24 per share.
Preferred Stock
During the three months ended September 30, 2023, June 30, 2023 and March 31, 2023, the Corporation declared $531 million, $306 million and $505 million of cash dividends on preferred stock, or a total of $1.3 billion for the nine months ended September 30, 2023. For more information on the Corporation’s preferred stock, including liquidation preference, dividend requirements and redemption period, see Note 13 – Shareholders’ Equity to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K.
89Bank of America
NOTE 12Accumulated Other Comprehensive Income (Loss)
The table below presents the changes in accumulated OCI after-tax for the nine months ended September 30, 2023 and 2022.
(Dollars in millions)
Debt Securities
Debit Valuation Adjustments
Derivatives
Employee
Benefit Plans
Foreign
Currency
Total
Balance, December 31, 2021
$
3,045
$
(1,636)
$
(1,880)
$
(3,642)
$
(991)
$
(5,104)
Net change
(6,381)
1,298
(10,890)
97
(47)
(15,923)
Balance, September 30, 2022
$
(3,336)
$
(338)
$
(12,770)
$
(3,545)
$
(1,038)
$
(21,027)
Balance, December 31, 2022
$
(2,983)
$
(881)
$
(11,935)
$
(4,309)
$
(1,048)
$
(21,156)
Net change
81
(419)
(317)
25
(6)
(636)
Balance, September 30, 2023
$
(2,902)
$
(1,300)
$
(12,252)
$
(4,284)
$
(1,054)
$
(21,792)
The table below presents the net change in fair value recorded in accumulated OCI, net realized gains and losses reclassified into earnings and other changes for each component of OCI pre- and after-tax for the nine months ended September 30, 2023 and 2022.
Pretax
Tax effect
After- tax
Pretax
Tax effect
After- tax
Nine Months Ended September 30
(Dollars in millions)
2023
2022
Debt securities:
Net increase (decrease) in fair value
$
(306)
$
84
$
(222)
$
(8,417)
$
2,064
$
(6,353)
Net realized (gains) losses reclassified into earnings (1)
404
(101)
303
(37)
9
(28)
Net change
98
(17)
81
(8,454)
2,073
(6,381)
Debit valuation adjustments:
Net increase (decrease) in fair value
(560)
136
(424)
1,698
(411)
1,287
Net realized (gains) losses reclassified into earnings (1)
7
(2)
5
14
(3)
11
Net change
(553)
134
(419)
1,712
(414)
1,298
Derivatives:
Net increase (decrease) in fair value
(1,027)
261
(766)
(14,681)
3,673
(11,008)
Reclassifications into earnings:
Net interest income
616
(153)
463
182
(46)
136
Compensation and benefits expense
(18)
4
(14)
(24)
6
(18)
Net realized (gains) losses reclassified into earnings
598
(149)
449
158
(40)
118
Net change
(429)
112
(317)
(14,523)
3,633
(10,890)
Employee benefit plans:
Net actuarial losses and other reclassified into earnings (2)
36
(11)
25
135
(38)
97
Net change
36
(11)
25
135
(38)
97
Foreign currency:
Net increase (decrease) in fair value
80
(75)
5
726
(774)
(48)
Net realized (gains) losses reclassified into earnings (1)
(44)
33
(11)
—
1
1
Net change
36
(42)
(6)
726
(773)
(47)
Total other comprehensive income (loss)
$
(812)
$
176
$
(636)
$
(20,404)
$
4,481
$
(15,923)
(1) Reclassifications of pretax debt securities, DVA and foreign currency (gains) losses are recorded in other income in the Consolidated Statement of Income.
(2) Reclassifications of pretax employee benefit plan costs are recorded in other general operating expense in the Consolidated Statement of Income.
Bank of America 90
NOTE 13Earnings Per Common Share
The calculation of earnings per common share (EPS) and diluted EPS for the three and nine months ended September 30, 2023 and 2022is presented below. For more information on the calculation of EPS, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K.
Three Months Ended September 30
Nine Months Ended September 30
(In millions, except per share information)
2023
2022
2023
2022
Earnings per common share
Net income
$
7,802
$
7,082
$
23,371
$
20,396
Preferred stock dividends
(532)
(503)
(1,343)
(1,285)
Net income applicable to common shareholders
$
7,270
$
6,579
$
22,028
$
19,111
Average common shares issued and outstanding
8,017.1
8,107.7
8,041.3
8,122.2
Earnings per common share
$
0.91
$
0.81
$
2.74
$
2.35
Diluted earnings per common share
Net income applicable to common shareholders
$
7,270
$
6,579
$
22,028
$
19,111
Add preferred stock dividends due to assumed conversions
—
—
167
—
Net income allocated to common shareholders
$
7,270
$
6,579
$
22,195
$
19,111
Average common shares issued and outstanding
8,017.1
8,107.7
8,041.3
8,122.2
Dilutive potential common shares (1)
58.8
53.1
112.1
51.1
Total diluted average common shares issued and outstanding
8,075.9
8,160.8
8,153.4
8,173.3
Diluted earnings per common share
$
0.90
$
0.81
$
2.72
$
2.34
(1)Includes incremental dilutive shares from preferred stock, restricted stock units, restricted stock and warrants.
For the nine months ended September 30, 2023, 62 million average dilutive potential common shares associated with the Series L preferred stock were included in the diluted share count under the “if-converted” method, whereas they were antidilutive for the three months ended September 30, 2023 and the three and nine months ended September 30, 2022.
NOTE 14Fair Value Measurements
Under applicable accounting standards, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Corporation determines the fair values of its financial instruments under applicable accounting standards and conducts a review of fair value hierarchy classifications on a quarterly basis. Transfers into or out of fair value hierarchy classifications are made if the significant inputs used in the financial models measuring the fair values of the assets and liabilities become unobservable or observable in the current
marketplace. During the nine months ended September 30, 2023, there were no changes to valuation approaches or techniques that had, or are expected to have, a material impact on the Corporation’s consolidated financial position or results of operations.
For more information regarding the fair value hierarchy, how the Corporation measures fair value and valuation techniques, see Note 1 – Summary of Significant Accounting Principles and Note 20 – Fair Value Measurements to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K. The Corporation accounts for certain financial instruments under the fair value option. For more information, see Note 15 – Fair Value Option.
Recurring Fair Value
Assets and liabilities carried at fair value on a recurring basis at September 30, 2023 and December 31, 2022, including financial instruments that the Corporation accounts for under the fair value option, are summarized in the following tables.
91Bank of America
September 30, 2023
Fair Value Measurements
(Dollars in millions)
Level 1
Level 2
Level 3
Netting Adjustments (1)
Assets/Liabilities at Fair Value
Assets
Time deposits placed and other short-term investments
$
1,129
$
—
$
—
$
—
$
1,129
Federal funds sold and securities borrowed or purchased under agreements to resell
—
414,435
—
(244,103)
170,332
Trading account assets:
U.S. Treasury and government agencies
67,333
221
—
—
67,554
Corporate securities, trading loans and other
—
44,553
2,156
—
46,709
Equity securities
65,627
39,093
178
—
104,898
Non-U.S. sovereign debt
11,043
26,496
366
—
37,905
Mortgage trading loans, MBS and ABS:
U.S. government-sponsored agency guaranteed
—
38,520
9
—
38,529
Mortgage trading loans, ABS and other MBS
—
9,614
1,200
—
10,814
Total trading account assets (2)
144,003
158,497
3,909
—
306,409
Derivative assets
15,908
365,554
4,620
(338,618)
47,464
AFS debt securities:
U.S. Treasury and government agencies
102,738
898
—
—
103,636
Mortgage-backed securities:
Agency
—
20,504
—
—
20,504
Agency-collateralized mortgage obligations
—
1,698
—
—
1,698
Non-agency residential
—
109
278
—
387
Commercial
—
6,741
—
—
6,741
Non-U.S. securities
67
18,699
106
—
18,872
Other taxable securities
—
3,179
—
—
3,179
Tax-exempt securities
—
10,542
51
—
10,593
Total AFS debt securities
102,805
62,370
435
—
165,610
Other debt securities carried at fair value:
U.S. Treasury and government agencies
1,058
—
—
—
1,058
Non-agency residential MBS
—
213
70
—
283
Non-U.S. and other securities
1,862
6,727
—
—
8,589
Total other debt securities carried at fair value
2,920
6,940
70
—
9,930
Loans and leases
—
4,143
107
—
4,250
Loans held-for-sale
—
1,436
171
—
1,607
Other assets (3)
5,609
1,723
1,726
—
9,058
Total assets (4)
$
272,374
$
1,015,098
$
11,038
$
(582,721)
$
715,789
Liabilities
Interest-bearing deposits in U.S. offices
$
—
$
404
$
—
$
—
$
404
Federal funds purchased and securities loaned or sold under agreements to repurchase
—
453,940
—
(244,103)
209,837
Trading account liabilities:
U.S. Treasury and government agencies
20,799
2
—
—
20,801
Equity securities
47,649
5,590
12
—
53,251
Non-U.S. sovereign debt
12,614
8,568
—
—
21,182
Corporate securities and other
—
7,514
72
—
7,586
Total trading account liabilities
81,062
21,674
84
—
102,820
Derivative liabilities
15,822
355,436
9,080
(339,483)
40,855
Short-term borrowings
—
4,035
11
—
4,046
Accrued expenses and other liabilities
6,991
3,015
5
—
10,011
Long-term debt
—
38,803
640
—
39,443
Total liabilities (4)
$
103,875
$
877,307
$
9,820
$
(583,586)
$
407,416
(1)Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties.
(2)Includes securities with a fair value of $25.3 billion that were segregated in compliance with securities regulations or deposited with clearing organizations. This amount is included in the parenthetical disclosure on the Consolidated Balance Sheet. Trading account assets also includes certain commodities inventory of $340 million that is accounted for at the lower of cost or net realizable value, which is the current selling price less any costs to sell.
(3)Includes MSRs, which are classified as Level 3 assets, of $1.0 billion.
(4)Total recurring Level 3 assets were 0.35 percent of total consolidated assets, and total recurring Level 3 liabilities were 0.34 percent of total consolidated liabilities.
Bank of America 92
December 31, 2022
Fair Value Measurements
(Dollars in millions)
Level 1
Level 2
Level 3
Netting Adjustments (1)
Assets/Liabilities at Fair Value
Assets
Time deposits placed and other short-term investments
$
868
$
—
$
—
$
—
$
868
Federal funds sold and securities borrowed or purchased under agreements to resell (2)
—
146,999
—
—
146,999
Trading account assets:
U.S. Treasury and government agencies
58,894
212
—
—
59,106
Corporate securities, trading loans and other
—
46,897
2,384
—
49,281
Equity securities
77,868
35,065
145
—
113,078
Non-U.S. sovereign debt
7,392
26,306
518
—
34,216
Mortgage trading loans, MBS and ABS:
U.S. government-sponsored agency guaranteed
—
28,563
34
—
28,597
Mortgage trading loans, ABS and other MBS
—
10,312
1,518
—
11,830
Total trading account assets (3)
144,154
147,355
4,599
—
296,108
Derivative assets
14,775
380,380
3,213
(349,726)
48,642
AFS debt securities:
U.S. Treasury and government agencies
158,102
920
—
—
159,022
Mortgage-backed securities:
Agency
—
23,442
—
—
23,442
Agency-collateralized mortgage obligations
—
2,221
—
—
2,221
Non-agency residential
—
128
258
—
386
Commercial
—
6,407
—
—
6,407
Non-U.S. securities
—
13,212
195
—
13,407
Other taxable securities
—
4,645
—
—
4,645
Tax-exempt securities
—
11,207
51
—
11,258
Total AFS debt securities
158,102
62,182
504
—
220,788
Other debt securities carried at fair value:
U.S. Treasury and government agencies
561
—
—
—
561
Non-agency residential MBS
—
248
119
—
367
Non-U.S. and other securities
3,027
5,251
—
—
8,278
Total other debt securities carried at fair value
3,588
5,499
119
—
9,206
Loans and leases
—
5,518
253
—
5,771
Loans held-for-sale
—
883
232
—
1,115
Other assets (4)
6,898
897
1,799
—
9,594
Total assets (5)
$
328,385
$
749,713
$
10,719
$
(349,726)
$
739,091
Liabilities
Interest-bearing deposits in U.S. offices
$
—
$
311
$
—
$
—
$
311
Federal funds purchased and securities loaned or sold under agreements to repurchase (2)
—
151,708
—
—
151,708
Trading account liabilities:
U.S. Treasury and government agencies
13,906
181
—
—
14,087
Equity securities
36,937
4,825
—
—
41,762
Non-U.S. sovereign debt
9,636
8,228
—
—
17,864
Corporate securities and other
—
6,628
58
—
6,686
Total trading account liabilities
60,479
19,862
58
—
80,399
Derivative liabilities
15,431
376,979
6,106
(353,700)
44,816
Short-term borrowings
—
818
14
—
832
Accrued expenses and other liabilities
7,458
2,262
32
—
9,752
Long-term debt
—
32,208
862
—
33,070
Total liabilities (5)
$
83,368
$
584,148
$
7,072
$
(353,700)
$
320,888
(1)Amounts represent the impact of legally enforceable derivative master netting agreements and also cash collateral held or placed with the same counterparties.
(2)Amounts have been netted by $221.7 billion to reflect the application of legally enforceable master netting agreements.
(3)Includes securities with a fair value of $16.6 billion that were segregated in compliance with securities regulations or deposited with clearing organizations. This amount is included in the parenthetical disclosure on the Consolidated Balance Sheet. Trading account assets also includes certain commodities inventory of $40 million that is accounted for at the lower of cost or net realizable value, which is the current selling price less any costs to sell.
(4)Includes MSRs, which are classified as Level 3 assets, of $1.0 billion.
(5)Total recurring Level 3 assets were 0.35 percent of total consolidated assets, and total recurring Level 3 liabilities were 0.25 percent of total consolidated liabilities.
93Bank of America
The following tables present a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three and nine months ended September 30, 2023 and 2022, including net realized and unrealized gains (losses) included in earnings and accumulated OCI. Transfers into Level 3 occur primarily due
to decreased price observability, and transfers out of Level 3 occur primarily due to increased price observability. Transfers occur on a regular basis for long-term debt instruments due to changes in the impact of unobservable inputs on the value of the embedded derivative in relation to the instrument as a whole.
Level 3 – Fair Value Measurements (1)
Balance July 1
Total
Realized/Unrealized Gains
(Losses) in Net
Income (2)
Gains (Losses) in OCI (3)
Gross
Gross Transfers into Level 3
Gross Transfers out of Level 3
Balance September 30
Change in Unrealized Gains (Losses) in Net Income Related to Financial Instruments Still Held (2)
(Dollars in millions)
Purchases
Sales
Issuances
Settlements
Three Months Ended September 30, 2023
Federal funds sold and securities borrowed or purchased under agreements to resell
$
7
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
(7)
$
—
$
—
Trading account assets:
Corporate securities, trading loans and other
2,100
53
(1)
112
(17)
—
(149)
137
(79)
2,156
16
Equity securities
159
45
—
4
(3)
—
(47)
51
(31)
178
(3)
Non-U.S. sovereign debt
568
16
(14)
2
(3)
—
(203)
—
—
366
16
Mortgage trading loans, MBS and ABS
1,233
(10)
—
40
(101)
—
(8)
90
(35)
1,209
(12)
Total trading account assets
4,060
104
(15)
158
(124)
—
(407)
278
(145)
3,909
17
Net derivative assets (liabilities) (4)
(4,997)
1,445
(235)
613
(395)
—
(577)
(315)
1
(4,460)
1,369
AFS debt securities:
Non-agency residential MBS
288
(2)
(6)
—
—
—
(2)
—
—
278
(2)
Non-U.S. and other taxable securities
184
4
—
—
—
—
(86)
4
—
106
2
Tax-exempt securities
51
—
—
—
—
—
—
—
—
51
—
Total AFS debt securities
523
2
(6)
—
—
—
(88)
4
—
435
—
Other debt securities carried at fair value – Non-agency residential MBS
(1)Assets (liabilities). For assets, increase (decrease) to Level 3 and for liabilities, (increase) decrease to Level 3.
(2)Includes gains (losses) reported in earnings in the following income statement line items: Trading account assets/liabilities - market making and similar activities and other income; Net derivative assets (liabilities) - market making and similar activities and other income; AFS debt securities - other income; Other debt securities carried at fair value - other income; Loans and leases - market making and similar activities and other income; Loans held-for-sale - other income; Other assets - market making and similar activities and other income related to MSRs; Short-term borrowings - market making and similar activities; Accrued expenses and other liabilities - other income; Long-term debt - market making and similar activities.
(3)Includes unrealized gains (losses) in OCI on AFS debt securities, foreign currency translation adjustments, derivatives designated in cash flow hedges and the impact of changes in the Corporation’s credit spreads on long-term debt accounted for under the fair value option. Amounts include net unrealized losses of $245 million and $60 million related to financial instruments still held at September 30, 2023 and 2022.
(4)Net derivative assets (liabilities) include derivative assets of $4.6 billion and $3.3 billion and derivative liabilities of $9.1 billion and $5.5 billion at September 30, 2023 and 2022.
(5)Amounts represent instruments that are accounted for under the fair value option.
(6)Issuances represent MSRs recognized following securitizations or whole-loan sales.
(7)Settlements primarily represent the net change in fair value of the MSR asset due to the recognition of modeled cash flows and the passage of time.
Bank of America 94
Level 3 – Fair Value Measurements (1)
Balance January 1
Total Realized/Unrealized Gains (Losses) in Net Income (2)
Gains (Losses) in OCI (3)
Gross
Gross Transfers into Level 3
Gross Transfers out of Level 3
Balance September 30
Change in Unrealized Gains (Losses) in Net Income Related to Financial Instruments Still Held (2)
(Dollars in millions)
Purchases
Sales
Issuances
Settlements
Nine Months Ended September 30, 2023
Federal funds sold and securities borrowed or purchased under agreements to resell
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
7
$
(7)
$
—
$
—
Trading account assets:
Corporate securities, trading loans and other
2,384
114
1
336
(172)
14
(601)
331
(251)
2,156
38
Equity securities
145
39
—
20
(47)
—
(59)
134
(54)
178
(10)
Non-U.S. sovereign debt
518
54
22
38
(9)
—
(257)
—
—
366
56
Mortgage trading loans, MBS and ABS
1,552
(38)
—
144
(303)
—
(229)
332
(249)
1,209
(50)
Total trading account assets
4,599
169
23
538
(531)
14
(1,146)
797
(554)
3,909
34
Net derivative assets (liabilities) (4)
(2,893)
(116)
(375)
1,142
(994)
—
(1,372)
(154)
302
(4,460)
(1,794)
AFS debt securities:
Non-agency residential MBS
258
1
26
—
—
—
(7)
—
—
278
1
Non-U.S. and other taxable securities
195
8
7
—
—
—
(101)
4
(7)
106
—
Tax-exempt securities
51
—
—
—
—
—
—
—
—
51
—
Total AFS debt securities
504
9
33
—
—
—
(108)
4
(7)
435
1
Other debt securities carried at fair value – Non-agency residential MBS
(1)Assets (liabilities). For assets, increase (decrease) to Level 3 and for liabilities, (increase) decrease to Level 3.
(2)Includes gains (losses) reported in earnings in the following income statement line items: Trading account assets/liabilities - market making and similar activities and other income; Net derivative assets (liabilities) - market making and similar activities and other income; AFS debt securities - other income; Other debt securities carried at fair value - other income; Loans and leases - market making and similar activities and other income; Loans held-for-sale - other income; Other assets - market making and similar activities and other income primarily related to MSRs; Short-term borrowings - market making and similar activities; Accrued expenses and other liabilities - market making and similar activities and other income; Long-term debt - market making and similar activities.
(3)Includes unrealized gains (losses) in OCI on AFS debt securities, foreign currency translation adjustments, derivatives designated in cash flow hedges and the impact of changes in the Corporation’s credit spreads on long-term debt accounted for under the fair value option. Amounts include net unrealized gains (losses) of $(332) million and $2 million related to financial instruments still held at September 30, 2023 and 2022.
(4)Net derivative assets (liabilities) include derivative assets of $4.6 billion and $3.3 billion and derivative liabilities of $9.1 billion and $5.5 billion at September 30, 2023 and 2022.
(5)Amounts represent instruments that are accounted for under the fair value option.
(6)Issuances represent MSRs recognized following securitizations or whole-loan sales.
(7)Settlements primarily represent the net change in fair value of the MSR asset due to the recognition of modeled cash flows and the passage of time.
95Bank of America
The following tables present information about significant unobservable inputs related to the Corporation’s material categories of Level 3 financial assets and liabilities at September 30, 2023 and December 31, 2022.
Quantitative Information about Level 3 Fair Value Measurements at September 30, 2023
(Dollars in millions)
Inputs
Financial Instrument
Fair Value
Valuation Technique
Significant Unobservable Inputs
Ranges of Inputs
Weighted Average (1)
Loans and Securities (2)
Instruments backed by residential real estate assets
$
579
Discounted cash flow, Market comparables
Yield
0% to 20%
9
%
Trading account assets – Mortgage trading loans, MBS and ABS
129
Prepayment speed
0% to 41% CPR
10% CPR
Loans and leases
102
Default rate
0% to 3% CDR
1% CDR
AFS debt securities – Non-agency residential
278
Price
$0 to $115
$72
Other debt securities carried at fair value – Non-agency residential
70
Loss severity
0% to 100%
29
%
Instruments backed by commercial real estate assets
$
377
Discounted cash flow
Yield
0% to 25%
12
%
Trading account assets – Corporate securities, trading loans and other
294
Price
$0 to $100
$75
Trading account assets – Mortgage trading loans, MBS and ABS
83
Commercial loans, debt securities and other
$
3,558
Discounted cash flow, Market comparables
Yield
5% to 51%
13
%
Trading account assets – Corporate securities, trading loans and other
1,862
Prepayment speed
10% to 20%
16
%
Trading account assets – Non-U.S. sovereign debt
366
Default rate
3% to 4%
4
%
Trading account assets – Mortgage trading loans, MBS and ABS
997
Loss severity
35% to 40%
37
%
AFS debt securities – Tax-exempt securities
51
Price
$0 to $157
$73
AFS debt securities – Non-U.S. and other taxable securities
106
Loans and leases
5
Loans held-for-sale
171
Other assets, primarily auction rate securities
$
680
Discounted cash flow, Market comparables
Price
$10 to $95
$85
Discount rate
11
%
n/a
MSRs
$
1,046
Discounted cash flow
Weighted-average life, fixed rate (5)
0 to 14 years
6 years
Weighted-average life, variable rate (5)
0 to 12 years
3 years
Option-adjusted spread, fixed rate
7% to 14%
9
%
Option-adjusted spread, variable rate
9% to 15%
12
%
Structured liabilities
Long-term debt
$
(640)
Discounted cash flow, Market comparables, Industry standard derivative pricing (3)
Yield
51%
n/a
Equity correlation
1% to 97%
89
%
Price
$0 to $100
$90
Natural gas forward price
$2/MMBtu to $8/MMBtu
$4 /MMBtu
Net derivative assets (liabilities)
Credit derivatives
$
9
Discounted cash flow, Stochastic recovery correlation model
Credit spreads
3 to 81 bps
64 bps
Prepayment speed
15% CPR
n/a
Default rate
2% CDR
n/a
Credit correlation
21% to 59%
52
%
Price
$0 to $92
$85
Equity derivatives
$
(635)
Industry standard derivative pricing (3)
Equity correlation
0% to 99%
67
%
Long-dated equity volatilities
2% to 94%
36
%
Commodity derivatives
$
(545)
Discounted cash flow, Industry standard derivative pricing (3)
Natural gas forward price
$2/MMBtu to $8/MMBtu
$4 /MMBtu
Power forward price
$20 to $92
$42
Interest rate derivatives
$
(3,289)
Industry standard derivative pricing (4)
Correlation (IR/IR)
(35)% to 89%
66
%
Correlation (FX/IR)
11% to 58%
37
%
Long-dated inflation rates
(1)% to 12%
0
%
Long-dated inflation volatilities
0% to 5%
1
%
Interest rate volatilities
0% to 2%
1
%
Total net derivative assets (liabilities)
$
(4,460)
(1)For loans and securities, structured liabilities and net derivative assets (liabilities), the weighted average is calculated based upon the absolute fair value of the instruments.
(2)The categories are aggregated based upon product type, which differs from financial statement classification. The following is a reconciliation to the line items in the table on page 92: Trading account assets – Corporate securities, trading loans and other of $2.2 billion, Trading account assets – Non-U.S. sovereign debt of $366 million, Trading account assets – Mortgage trading loans, MBS and ABS of $1.2 billion, AFS debt securities of $435 million, Other debt securities carried at fair value - Non-agency residential of $70 million, Other assets, including MSRs, of $1.7 billion, Loans and leases of $107 million and LHFS of $171 million.
(3)Includes models such as Monte Carlo simulation and Black-Scholes.
(4)Includes models such as Monte Carlo simulation, Black-Scholes and other methods that model the joint dynamics of interest, inflation and foreign exchange rates.
(5)The weighted-average life is a product of changes in market rates of interest, prepayment rates and other model and cash flow assumptions.
CPR = Constant Prepayment Rate
CDR = Constant Default Rate
MMBtu = Million British thermal units
IR = Interest Rate
FX = Foreign Exchange
n/a = not applicable
Bank of America 96
Quantitative Information about Level 3 Fair Value Measurements at December 31, 2022
(Dollars in millions)
Inputs
Financial Instrument
Fair Value
Valuation Technique
Significant Unobservable Inputs
Ranges of Inputs
Weighted Average (1)
Loans and Securities (2)
Instruments backed by residential real estate assets
$
852
Discounted cash flow, Market comparables
Yield
0% to 25%
10
%
Trading account assets – Mortgage trading loans, MBS and ABS
338
Prepayment speed
0% to 29% CPR
12% CPR
Loans and leases
137
Default rate
0% to 3% CDR
1% CDR
AFS debt securities - Non-agency residential
258
Price
$0 to $111
$26
Other debt securities carried at fair value - Non-agency residential
119
Loss severity
0% to 100%
24
%
Instruments backed by commercial real estate assets
$
362
Discounted cash flow
Yield
0% to 25%
10
%
Trading account assets – Corporate securities, trading loans and other
292
Price
$0 to $100
$75
Trading account assets – Mortgage trading loans, MBS and ABS
66
Loans held-for-sale
4
Commercial loans, debt securities and other
$
4,348
Discounted cash flow, Market comparables
Yield
5% to 43%
15
%
Trading account assets – Corporate securities, trading loans and other
2,092
Prepayment speed
10% to 20%
15
%
Trading account assets – Non-U.S. sovereign debt
518
Default rate
3% to 4%
4
%
Trading account assets – Mortgage trading loans, MBS and ABS
1,148
Loss severity
35% to 40%
38
%
AFS debt securities – Tax-exempt securities
51
Price
$0 to $157
$75
AFS debt securities – Non-U.S. and other taxable securities
195
Loans and leases
116
Loans held-for-sale
228
Other assets, primarily auction rate securities
$
779
Discounted cash flow, Market comparables
Price
$10 to $97
$94
Discount rate
11%
n/a
MSRs
$
1,020
Discounted cash flow
Weighted-average life, fixed rate (5)
0 to 14 years
6 years
Weighted-average life, variable rate (5)
0 to 12 years
4 years
Option-adjusted spread, fixed rate
7% to 14%
9
%
Option-adjusted spread, variable rate
9% to 15%
12
%
Structured liabilities
Long-term debt
$
(862)
Discounted cash flow, Market comparables, Industry standard derivative pricing (3)
Yield
22% to 43%
23
%
Equity correlation
0% to 95%
69
%
Price
$0 to $119
$90
Natural gas forward price
$3/MMBtu to $13/MMBtu
$9/MMBtu
Net derivative assets (liabilities)
Credit derivatives
$
(44)
Discounted cash flow, Stochastic recovery correlation model
Credit spreads
3 to 63 bps
22 bps
Upfront points
0 to 100 points
83 points
Prepayment speed
15% CPR
n/a
Default rate
2% CDR
n/a
Credit correlation
18% to 53%
44
%
Price
$0 to $151
$63
Equity derivatives
$
(1,534)
Industry standard derivative pricing (3)
Equity correlation
0% to 100%
73
%
Long-dated equity volatilities
4% to 101%
44
%
Commodity derivatives
$
(291)
Discounted cash flow, Industry standard derivative pricing (3)
Natural gas forward price
$3/MMBtu to $13/MMBtu
$8/MMBtu
Power forward price
$9 to $123
$43
Interest rate derivatives
$
(1,024)
Industry standard derivative pricing (4)
Correlation (IR/IR)
(35)% to 89%
67
%
Correlation (FX/IR)
11% to 58%
43
%
Long-dated inflation rates
G0% to 39%
1
%
Long-dated inflation volatilities
0% to 5%
2
%
Interest rates volatilities
0% to 2%
1
%
Total net derivative assets (liabilities)
$
(2,893)
(1)For loans and securities, structured liabilities and net derivative assets (liabilities), the weighted average is calculated based upon the absolute fair value of the instruments.
(2)The categories are aggregated based upon product type, which differs from financial statement classification. The following is a reconciliation to the line items in the table on page 93: Trading account assets – Corporate securities, trading loans and other of $2.4 billion, Trading account assets – Non-U.S. sovereign debt of $518 million, Trading account assets – Mortgage trading loans, MBS and ABS of $1.6 billion, AFS debt securities of $504 million, Other debt securities carried at fair value - Non-agency residential of $119 million, Other assets, including MSRs, of $1.8 billion, Loans and leases of $253 million and LHFS of $232 million.
(3)Includes models such as Monte Carlo simulation and Black-Scholes.
(4)Includes models such as Monte Carlo simulation, Black-Scholes and other methods that model the joint dynamics of interest, inflation and foreign exchange rates.
(5)The weighted-average life is a product of changes in market rates of interest, prepayment rates and other model and cash flow assumptions.
CPR = Constant Prepayment Rate
CDR = Constant Default Rate
MMBtu = Million British thermal units
IR = Interest Rate
FX = Foreign Exchange
n/a = not applicable
Uncertainty of Fair Value Measurements from Unobservable Inputs
For information on the types of instruments, valuation approaches and the impact of changes in unobservable inputs used in Level 3 measurements, see Note 20 – Fair Value Measurements to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K.
97Bank of America
Nonrecurring Fair Value
The Corporation holds certain assets that are measured at fair value only in certain situations (e.g., the impairment of an asset), and these measurements are referred to herein as nonrecurring. The amounts below represent assets still held as of the reporting date for which a nonrecurring fair value adjustment was recorded during the three and nine months ended September 30, 2023 and 2022.
Assets Measured at Fair Value on a Nonrecurring Basis
September 30, 2023
Three Months Ended September 30, 2023
Nine Months Ended September 30, 2023
(Dollars in millions)
Level 2
Level 3
Gains (Losses)
Assets
Loans held-for-sale
$
276
$
3,066
$
(28)
$
(95)
Loans and leases (1)
—
129
(15)
(36)
Foreclosed properties (2, 3)
—
44
1
(2)
Other assets
31
905
(182)
(189)
September 30, 2022
Three Months Ended September 30, 2022
Nine Months Ended September 30, 2022
Assets
Loans held-for-sale
$
1,752
$
398
$
119
$
87
Loans and leases (1)
—
152
(13)
(44)
Foreclosed properties (2, 3)
—
6
(2)
(3)
Other assets
80
48
—
(40)
(1)Includes $4 million and $8 million of losses on loans that were written down to a collateral value of zero during the three and nine months ended September 30, 2023 compared to losses of $6 million and $17 million for the same periods in 2022.
(2)Amounts are included in other assets on the Consolidated Balance Sheet and represent the carrying value of foreclosed properties that were written down subsequent to their initial classification as foreclosed properties. Losses on foreclosed properties include losses recorded during the first 90 days after transfer of a loan to foreclosed properties.
(3)Excludes $33 million and $75 million of properties acquired upon foreclosure of certain government-guaranteed loans (principally FHA-insured loans) at September 30, 2023 and 2022.
The table below presents information about significant unobservable inputs utilized in the Corporation's nonrecurring Level 3 fair value measurements during the nine months ended September 30, 2023 and the year ended December 31, 2022.
Quantitative Information about Nonrecurring Level 3 Fair Value Measurements
Inputs
Financial Instrument
Fair Value
Valuation Technique
Significant Unobservable Inputs
Ranges of Inputs
Weighted
Average (1)
(Dollars in millions)
Nine Months Ended September 30, 2023
Loans held-for-sale
$
3,066
Pricing model
Implied yield
12% to 26%
n/a
Loans and leases (2)
129
Market comparables
OREO discount
10% to 66%
26
%
Costs to sell
8% to 24%
9
%
Other assets (3)
905
Discounted cash flow
Discount rate
7
%
n/a
Year Ended December 31, 2022
Loans held-for-sale
$
3,079
Pricing model
Implied yield
9% to 24%
n/a
Loans and leases (2)
166
Market comparables
OREO discount
10% to 66%
26
%
Costs to sell
8% to 24%
9
%
Other assets (3)
165
Discounted cash flow
Discount rate
7
%
n/a
(1)The weighted average is calculated based upon the fair value of the loans.
(2)Represents residential mortgages where the loan has been written down to the fair value of the underlying collateral.
(3)Represents the fair value of certain impaired renewable energy investments.
n/a = not applicable
NOTE 15Fair Value Option
The Corporation elects to account for certain financial instruments under the fair value option. For more information on the primary financial instruments for which the fair value option elections have been made, see Note 21 – Fair Value Option to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K. The following tables provide information about the fair value carrying amount and the
contractual principal outstanding of assets and liabilities accounted for under the fair value option at September 30, 2023 and December 31, 2022, and information about where changes in the fair value of assets and liabilities accounted for under the fair value option are included in the Consolidated Statement of Income for the three and nine months ended September 30, 2023 and 2022.
Bank of America 98
Fair Value Option Elections
September 30, 2023
December 31, 2022
(Dollars in millions)
Fair Value Carrying Amount
Contractual Principal Outstanding
Fair Value Carrying Amount Less Unpaid Principal
Fair Value Carrying Amount
Contractual Principal Outstanding
Fair Value Carrying Amount Less Unpaid Principal
Federal funds sold and securities borrowed or purchased under agreements to resell
$
170,332
$
170,323
$
9
$
146,999
$
147,158
$
(159)
Loans reported as trading account assets (1)
8,562
15,975
(7,413)
10,143
17,682
(7,539)
Trading inventory – other
22,967
n/a
n/a
20,770
n/a
n/a
Consumer and commercial loans
4,250
4,317
(67)
5,771
5,897
(126)
Loans held-for-sale (1)
1,607
2,365
(758)
1,115
1,873
(758)
Other assets
1,271
n/a
n/a
620
n/a
n/a
Long-term deposits
404
488
(84)
311
381
(70)
Federal funds purchased and securities loaned or sold under agreements to repurchase
209,837
209,914
(77)
151,708
151,885
(177)
Short-term borrowings
4,046
4,065
(19)
832
833
(1)
Unfunded loan commitments
62
n/a
n/a
110
n/a
n/a
Accrued expenses and other liabilities
1,645
1,894
(249)
1,217
1,161
56
Long-term debt
39,443
45,504
(6,061)
33,070
36,830
(3,760)
(1)A significant portion of the loans reported as trading account assets and LHFS are distressed loans that were purchased at a deep discount to par, and the remainder are loans with a fair value near contractual principal outstanding.
n/a = not applicable
Gains (Losses) Related to Assets and Liabilities Accounted for Under the Fair Value Option
Three Months Ended September 30
2023
2022
(Dollars in millions)
Market making and similar activities
Other Income
Total
Market making and similar activities
Other Income
Total
Loans reported as trading account assets
$
58
$
—
$
58
$
(62)
$
—
$
(62)
Trading inventory – other (1)
(900)
—
(900)
(2,141)
—
(2,141)
Consumer and commercial loans
(50)
15
(35)
(16)
25
9
Loans held-for-sale (2)
—
(38)
(38)
—
(86)
(86)
Short-term borrowings
(1)
—
(1)
81
—
81
Unfunded loan commitments
(1)
7
6
—
27
27
Accrued expenses and other liabilities
197
—
197
—
—
—
Long-term debt (3)
863
(4)
859
1,562
(16)
1,546
Other (4)
38
(1)
37
12
(1)
11
Total
$
204
$
(21)
$
183
$
(564)
$
(51)
$
(615)
Nine Months Ended September 30
2023
2022
Loans reported as trading account assets
$
208
$
—
$
208
$
(211)
$
—
$
(211)
Trading inventory – other (1)
2,065
—
2,065
(4,269)
—
(4,269)
Consumer and commercial loans
(189)
56
(133)
(86)
(53)
(139)
Loans held-for-sale (2)
—
(22)
(22)
—
(308)
(308)
Short-term borrowings
10
—
10
643
—
643
Unfunded loan commitments
(1)
27
26
—
(61)
(61)
Accrued expenses and other liabilities
246
—
246
—
—
—
Long-term debt (3)
361
(27)
334
5,049
(36)
5,013
Other (4)
73
(12)
61
6
23
29
Total
$
2,773
$
22
$
2,795
$
1,132
$
(435)
$
697
(1) The gains (losses) in market making and similar activities are primarily offset by (losses) gains on trading liabilities that hedge these assets.
(2) Includes the value of IRLCs on funded loans, including those sold during the period.
(3) The net gains (losses) in market making and similar activities relate to the embedded derivatives in structured liabilities and are typically offset by (losses) gains on derivatives and securities that hedge these liabilities. For the cumulative impact of changes in the Corporation’s own credit spreads and the amount recognized in accumulated OCI, see Note 12 – Accumulated Other Comprehensive Income (Loss). For more information on how the Corporation’s own credit spread is determined, see Note 20 – Fair Value Measurements to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K.
(4) Includes gains (losses) on federal funds sold and securities borrowed or purchased under agreements to resell, other assets, long-term deposits, and federal funds purchased and securities loaned or sold under agreements to repurchase.
99Bank of America
Gains (Losses) Related to Borrower-specific Credit Risk for Assets and Liabilities Accounted for Under the Fair Value Option
Three Months Ended September 30
Nine Months Ended September 30
(Dollars in millions)
2023
2022
2023
2022
Loans reported as trading account assets
$
19
$
(123)
$
55
$
(434)
Consumer and commercial loans
5
19
41
(72)
Loans held-for-sale
(17)
(3)
(17)
(14)
Unfunded loan commitments
7
27
27
(61)
NOTE 16 Fair Value of Financial Instruments
The following disclosures include financial instruments that are not carried at fair value or only a portion of the ending balance is carried at fair value on the Consolidated Balance Sheet. Certain loans, deposits, long-term debt, unfunded lending commitments and other financial instruments are accounted for under the fair value option. For more information, see Note 21 – Fair Value Option to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K.
Fair Value of Financial Instruments
The carrying values and fair values by fair value hierarchy of certain financial instruments where only a portion of the ending balance was carried at fair value at September 30, 2023 and December 31, 2022 are presented in the following table.
Fair Value of Financial Instruments
Fair Value
Carrying Value
Level 2
Level 3
Total
(Dollars in millions)
September 30, 2023
Financial assets
Loans
$
1,016,900
$
49,012
$
937,250
$
986,262
Loans held-for-sale
7,591
4,096
3,496
7,592
Financial liabilities
Deposits (1)
1,884,601
1,885,172
—
1,885,172
Long-term debt
290,359
287,949
948
288,897
Commercial unfunded lending commitments (2)
1,416
57
3,852
3,909
December 31, 2022
Financial assets
Loans
$
1,014,593
$
50,194
$
935,282
$
985,476
Loans held-for-sale
6,871
3,417
3,455
6,872
Financial liabilities
Deposits (1)
1,930,341
1,930,165
—
1,930,165
Long-term debt
275,982
271,993
1,136
273,129
Commercial unfunded lending commitments (2)
1,650
77
6,596
6,673
(1) Includes demand deposits of $887.7 billion and $918.9 billion with no stated maturities at September 30, 2023 and December 31, 2022.
(2) The carrying value of commercial unfunded lending commitments is included in accrued expenses and other liabilities on the Consolidated Balance Sheet. The Corporation does not estimate the fair value of consumer unfunded lending commitments because, in many instances, the Corporation can reduce or cancel these commitments by providing notice to the borrower. For more information on commitments, see Note 10 – Commitments and Contingencies.
NOTE 17Business Segment Information
The Corporation reports its results of operations through the following four business segments: Consumer Banking, Global Wealth & Investment Management,Global Banking and Global Markets, with the remaining operations recorded in All Other. For more information, see Note 23 – Business Segment Information to the Consolidated Financial Statements of the Corporation’s
2022 Annual Report on Form 10-K. The following tables present net income and the components thereto (with net interest income on an FTE basis for the business segments, All Other and the total Corporation) for the three and nine months ended September 30, 2023 and 2022, and total assets at September 30, 2023 and 2022 for each business segment, as well as All Other.
Bank of America 100
Results of Business Segments and All Other
At and for the three months ended September 30
Total Corporation (1)
Consumer Banking
Global Wealth & Investment Management
(Dollars in millions)
2023
2022
2023
2022
2023
2022
Net interest income
$
14,532
$
13,871
$
8,391
$
7,784
$
1,755
$
1,981
Noninterest income
10,788
10,737
2,081
2,120
3,566
3,448
Total revenue, net of interest expense
25,320
24,608
10,472
9,904
5,321
5,429
Provision for credit losses
1,234
898
1,397
738
(6)
37
Noninterest expense
15,838
15,303
5,256
5,097
3,950
3,816
Income before income taxes
8,248
8,407
3,819
4,069
1,377
1,576
Income tax expense
446
1,325
955
997
344
386
Net income
$
7,802
$
7,082
$
2,864
$
3,072
$
1,033
$
1,190
Period-end total assets
$
3,153,090
$
3,072,953
$
1,062,038
$
1,149,918
$
333,779
$
370,790
Global Banking
Global Markets
All Other
2023
2022
2023
2022
2023
2022
Net interest income
$
3,613
$
3,326
$
674
$
743
$
99
$
37
Noninterest income
2,590
2,265
4,268
3,740
(1,717)
(836)
Total revenue, net of interest expense
6,203
5,591
4,942
4,483
(1,618)
(799)
Provision for credit losses
(119)
170
(14)
11
(24)
(58)
Noninterest expense
2,804
2,651
3,235
3,023
593
716
Income before income taxes
3,518
2,770
1,721
1,449
(2,187)
(1,457)
Income tax expense
950
734
473
384
(2,276)
(1,176)
Net income
$
2,568
$
2,036
$
1,248
$
1,065
$
89
$
(281)
Period-end total assets
$
588,578
$
575,442
$
864,792
$
848,752
$
303,903
$
128,051
(1)There were no material intersegment revenues.
Results of Business Segments and All Other
At and for the nine months ended September 30
Total Corporation (1)
Consumer Banking
Global Wealth & Investment Management
(Dollars in millions)
2023
2022
2023
2022
2023
2022
Net interest income
$
43,407
$
38,096
$
25,421
$
21,551
$
5,436
$
5,451
Noninterest income
33,637
32,637
6,281
6,302
10,442
10,887
Total revenue, net of interest expense
77,044
70,733
31,702
27,853
15,878
16,338
Provision for credit losses
3,290
1,451
3,753
1,036
32
29
Noninterest expense
48,114
45,895
16,182
14,977
11,942
11,706
Income before income taxes
25,640
23,387
11,767
11,840
3,904
4,603
Income tax expense
2,269
2,991
2,942
2,901
976
1,128
Net income
$
23,371
$
20,396
$
8,825
$
8,939
$
2,928
$
3,475
Period-end total assets
$
3,153,090
$
3,072,953
$
1,062,038
$
1,149,918
$
333,779
$
370,790
Global Banking
Global Markets
All Other
2023
2022
2023
2022
2023
2022
Net interest income
$
11,210
$
8,304
$
1,080
$
2,717
$
260
$
73
Noninterest income
7,658
7,487
14,359
11,560
(5,103)
(3,599)
Total revenue, net of interest expense
18,868
15,791
15,439
14,277
(4,843)
(3,526)
Provision for credit losses
(347)
492
(71)
24
(77)
(130)
Noninterest expense
8,563
8,133
9,935
9,249
1,492
1,830
Income before income taxes
10,652
7,166
5,575
5,004
(6,258)
(5,226)
Income tax expense
2,876
1,899
1,533
1,326
(6,058)
(4,263)
Net income
$
7,776
$
5,267
$
4,042
$
3,678
$
(200)
$
(963)
Period-end total assets
$
588,578
$
575,442
$
864,792
$
848,752
$
303,903
$
128,051
(1) There were no material intersegment revenues.
101Bank of America
The table below presents noninterest income and the associated components for the three and nine months ended September 30, 2023 and 2022 for each business segment, All Other and the total Corporation. For more information, see Note 2 – Net Interest Income and Noninterest Income.
Noninterest Income by Business Segment and All Other
Total Corporation
Consumer Banking
Global Wealth & Investment Management
Three Months Ended September 30
(Dollars in millions)
2023
2022
2023
2022
2023
2022
Fees and commissions:
Card income
Interchange fees
$
994
$
1,060
$
789
$
834
$
(5)
$
4
Other card income
526
513
536
497
14
12
Total card income
1,520
1,573
1,325
1,331
9
16
Service charges
Deposit-related fees
1,124
1,162
605
597
10
18
Lending-related fees
340
304
—
—
10
—
Total service charges
1,464
1,466
605
597
20
18
Investment and brokerage services
Asset management fees
3,103
2,920
51
47
3,054
2,874
Brokerage fees
860
875
29
26
342
381
Total investment and brokerage services
3,963
3,795
80
73
3,396
3,255
Investment banking fees
Underwriting income
531
452
—
—
45
47
Syndication fees
209
283
—
—
—
—
Financial advisory services
448
432
—
—
—
—
Total investment banking fees
1,188
1,167
—
—
45
47
Total fees and commissions
8,135
8,001
2,010
2,001
3,470
3,336
Market making and similar activities
3,325
3,068
5
3
34
30
Other income (loss)
(672)
(332)
66
116
62
82
Total noninterest income
$
10,788
$
10,737
$
2,081
$
2,120
$
3,566
$
3,448
Global Banking
Global Markets
All Other (1)
Three Months Ended September 30
2023
2022
2023
2022
2023
2022
Fees and commissions:
Card income
Interchange fees
$
194
$
204
$
16
$
18
$
—
$
—
Other card income
3
2
—
—
(27)
2
Total card income
197
206
16
18
(27)
2
Service charges
Deposit-related fees
490
524
19
24
—
(1)
Lending-related fees
264
247
66
57
—
—
Total service charges
754
771
85
81
—
(1)
Investment and brokerage services
Asset management fees
—
—
—
—
(2)
(1)
Brokerage fees
14
11
475
457
—
—
Total investment and brokerage services
14
11
475
457
(2)
(1)
Investment banking fees
Underwriting income
230
181
318
260
(62)
(36)
Syndication fees
117
148
92
135
—
—
Financial advisory services
396
397
53
35
(1)
—
Total investment banking fees
743
726
463
430
(63)
(36)
Total fees and commissions
1,708
1,714
1,039
986
(92)
(36)
Market making and similar activities
21
52
3,195
2,874
70
109
Other income (loss)
861
499
34
(120)
(1,695)
(909)
Total noninterest income
$
2,590
$
2,265
$
4,268
$
3,740
$
(1,717)
$
(836)
(1)All Other includes eliminations of intercompany transactions.
Bank of America 102
Noninterest Income by Business Segment and All Other
Total Corporation
Consumer Banking
Global Wealth & Investment Management
Nine Months Ended September 30
(Dollars in millions)
2023
2022
2023
2022
2023
2022
Fees and commissions:
Card income
Interchange fees
$
2,973
$
3,067
$
2,350
$
2,430
$
(8)
$
15
Other card income
1,562
1,464
1,590
1,406
41
36
Total card income
4,535
4,531
3,940
3,836
33
51
Service charges
Deposit-related fees
3,266
4,109
1,729
2,120
31
56
Lending-related fees
972
907
—
—
26
—
Total service charges
4,238
5,016
1,729
2,120
57
56
Investment and brokerage services
Asset management fees
8,990
9,308
147
149
8,848
9,164
Brokerage fees
2,664
2,870
83
83
1,037
1,231
Total investment and brokerage services
11,654
12,178
230
232
9,885
10,395
Investment banking fees
Underwriting income
1,757
1,559
—
—
124
154
Syndication fees
620
896
—
—
—
—
Financial advisory services
1,186
1,297
—
—
—
—
Total investment banking fees
3,563
3,752
—
—
124
154
Total fees and commissions
23,990
25,477
5,899
6,188
10,099
10,656
Market making and similar activities
11,734
9,023
15
5
100
66
Other income (loss)
(2,087)
(1,863)
367
109
243
165
Total noninterest income
$
33,637
$
32,637
$
6,281
$
6,302
$
10,442
$
10,887
Global Banking
Global Markets
All Other (1)
Nine Months Ended September 30
2023
2022
2023
2022
2023
2022
Fees and commissions:
Card income
Interchange fees
$
580
$
573
$
51
$
49
$
—
$
—
Other card income
7
5
—
—
(76)
17
Total card income
587
578
51
49
(76)
17
Service charges
Deposit-related fees
1,446
1,849
59
80
1
4
Lending-related fees
757
741
189
166
—
—
Total service charges
2,203
2,590
248
246
1
4
Investment and brokerage services
Asset management fees
—
—
—
—
(5)
(5)
Brokerage fees
37
36
1,507
1,520
—
—
Total investment and brokerage services
37
36
1,507
1,520
(5)
(5)
Investment banking fees
Underwriting income
742
635
1,016
944
(125)
(174)
Syndication fees
345
466
275
430
—
—
Financial advisory services
1,042
1,197
144
99
—
1
Total investment banking fees
2,129
2,298
1,435
1,473
(125)
(173)
Total fees and commissions
4,956
5,502
3,241
3,288
(205)
(157)
Market making and similar activities
135
181
11,002
8,721
482
50
Other income (loss)
2,567
1,804
116
(449)
(5,380)
(3,492)
Total noninterest income
$
7,658
$
7,487
$
14,359
$
11,560
$
(5,103)
$
(3,599)
(1)All Other includes eliminations of intercompany transactions.
103Bank of America
Business Segment Reconciliations
Three Months Ended September 30
Nine Months Ended September 30
(Dollars in millions)
2023
2022
2023
2022
Segments’ total revenue, net of interest expense
$
26,938
$
25,407
$
81,887
$
74,259
Adjustments (1):
Asset and liability management activities
28
(13)
(404)
(146)
Liquidating businesses, eliminations and other
(1,646)
(786)
(4,439)
(3,380)
FTE basis adjustment
(153)
(106)
(422)
(315)
Consolidated revenue, net of interest expense
$
25,167
$
24,502
$
76,622
$
70,418
Segments’ total net income
7,713
7,363
23,571
21,359
Adjustments, net-of-tax (1):
Asset and liability management activities
16
(24)
(309)
(106)
Liquidating businesses, eliminations and other
73
(257)
109
(857)
Consolidated net income
$
7,802
$
7,082
$
23,371
$
20,396
September 30
2023
2022
Segments’ total assets
$
2,849,187
$
2,944,902
Adjustments (1):
Asset and liability management activities, including securities portfolio
1,185,910
1,129,824
Elimination of segment asset allocations to match liabilities
(945,715)
(1,065,057)
Other
63,708
63,284
Consolidated total assets
$
3,153,090
$
3,072,953
(1)Adjustments include consolidated income, expense and asset amounts not specifically allocated to individual business segments.
Bank of America 104
Glossary
Alt-A Mortgage –A type of U.S. mortgage that is considered riskier than A-paper, or “prime,” and less risky than “subprime,” the riskiest category. Typically, Alt-A mortgages are characterized by borrowers with less than full documentation, lower credit scores and higher LTVs.
Assets Under Management (AUM) – The total market value of assets under the investment advisory and/or discretion of GWIM which generate asset management fees based on a percentage of the assets’ market values. AUM reflects assets that are generally managed for institutional, high net worth and retail clients, and are distributed through various investment products including mutual funds, other commingled vehicles and separate accounts.
Banking Book – All on- and off-balance sheet financial instruments of the Corporation except for those positions that are held for trading purposes.
Brokerage and Other Assets– Non-discretionary client assets which are held in brokerage accounts or held for safekeeping.
Committed Credit Exposure– Any funded portion of a facility plus the unfunded portion of a facility on which the lender is legally bound to advance funds during a specified period under prescribed conditions.
Credit Derivatives – Contractual agreements that provide protection against a specified credit event on one or more referenced obligations.
Credit Valuation Adjustment (CVA) – A portfolio adjustment required to properly reflect the counterparty credit risk exposure as part of the fair value of derivative instruments.
Debit Valuation Adjustment (DVA)– A portfolio adjustment required to properly reflect the Corporation’s own credit risk exposure as part of the fair value of derivative instruments and/or structured liabilities.
Funding Valuation Adjustment (FVA)– A portfolio adjustment required to include funding costs on uncollateralized derivatives and derivatives where the Corporation is not permitted to use the collateral it receives.
Interest Rate Lock Commitment (IRLC)– Commitment with a loan applicant in which the loan terms are guaranteed for a designated period of time subject to credit approval.
Letter of Credit– A document issued on behalf of a customer to a third party promising to pay the third party upon presentation of specified documents. A letter of credit effectively substitutes the issuer’s credit for that of the customer.
Loan-to-value (LTV)– A commonly used credit quality metric. LTV is calculated as the outstanding carrying value of the loan divided by the estimated value of the property securing the loan.
Macro Products – Include currencies, interest rates and commodities products.
Margin Receivable– An extension of credit secured by eligible securities in certain brokerage accounts.
Matched Book – Repurchase and resale agreements or securities borrowed and loaned transactions where the overall asset and liability position is similar in size and/or maturity. Generally, these are entered into to accommodate customers where the Corporation earns the interest rate spread.
Mortgage Servicing Right (MSR) – The right to service a mortgage loan when the underlying loan is sold or securitized. Servicing includes collections for principal, interest and escrow payments from borrowers and accounting for and remitting principal and interest payments to investors.
Nonperforming Loans and Leases– Includes loans and leases that have been placed on nonaccrual status, including nonaccruing loans whose contractual terms have been restructured in a manner that grants a concession to a borrower experiencing financial difficulties.
Prompt Corrective Action (PCA)– A framework established by the U.S. banking regulators requiring banks to maintain certain levels of regulatory capital ratios, comprised of five categories of capitalization: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” Insured depository institutions that fail to meet certain of these capital levels are subject to increasingly strict limits on their activities, including their ability to make capital distributions, pay management compensation, grow assets and take other actions.
Subprime Loans – Although a standard industry definition for subprime loans (including subprime mortgage loans) does not exist, the Corporation defines subprime loans as specific product offerings for higher risk borrowers.
Troubled Debt Restructurings (TDRs)– Loans whose contractual terms have been restructured in a manner that grants a concession to a borrower experiencing financial difficulties. Certain consumer loans for which a binding offer to restructure has been extended are also classified as TDRs.
Value-at-Risk (VaR)– VaR is a model that simulates the value of a portfolio under a range of hypothetical scenarios in order to generate a distribution of potential gains and losses. VaR represents the loss the portfolio is expected to experience with a given confidence level based on historical data. A VaR model is an effective tool in estimating ranges of potential gains and losses on our trading portfolios.
105Bank of America
Key Metrics
Active Digital Banking Users –Mobile and/or online active users over the past 90 days.
Active Mobile Banking Users – Mobile active users over the past 90 days.
Book Value – Ending common shareholders’ equity divided by ending common shares outstanding.
Common Equity Ratio - Ending common shareholders’ equity divided by ending total assets.
Deposit Spread –Annualized net interest income divided by average deposits.
Dividend Payout Ratio – Common dividends declared divided by net income applicable to common shareholders.
Efficiency Ratio – Noninterest expense divided by total revenue, net of interest expense.
Gross Interest Yield – Effective annual percentage rate divided by average loans.
Net Interest Yield– Net interest income divided by average total interest-earning assets.
Operating Margin – Income before income taxes divided by total revenue, net of interest expense.
Return on Average Allocated Capital –Adjusted net income divided by allocated capital.
Return on Average Assets – Net income divided by total average assets.
Return on Average Common Shareholders’ Equity– Net income applicable to common shareholders divided by average common shareholders’ equity.
Return on Average Shareholders’ Equity– Net income divided by average shareholders’ equity.
Risk-adjusted Margin – Difference between total revenue, net of interest expense, and net credit losses divided by average loans.
Bank of America 106
Acronyms
ABS
Asset-backed securities
AFS
Available-for-sale
ALM
Asset and liability management
AUM
Assets under management
BANA
Bank of America, National Association
BHC
Bank holding company
BofAS
BofA Securities, Inc.
BofASE
BofA Securities Europe SA
bps
Basis points
CCAR
Comprehensive Capital Analysis and Review
CDO
Collateralized debt obligation
CECL
Current expected credit losses
CET1
Common equity tier 1
CFTC
Commodity Futures Trading Commission
CLO
Collateralized loan obligation
CLTV
Combined loan-to-value
CVA
Credit valuation adjustment
DVA
Debit valuation adjustment
ECL
Expected credit losses
EPS
Earnings per common share
ESG
Environmental, social and governance
FDIC
Federal Deposit Insurance Corporation
FHA
Federal Housing Administration
FHLB
Federal Home Loan Bank
FHLMC
Freddie Mac
FICC
Fixed income, currencies and commodities
FICO
Fair Isaac Corporation (credit score)
FNMA
Fannie Mae
FTE
Fully taxable-equivalent
FVA
Funding valuation adjustment
GAAP
Accounting principles generally accepted in the United States of America
GLS
Global Liquidity Sources
GNMA
Government National Mortgage Association
G-SIB
Global systemically important bank
GWIM
Global Wealth & Investment Management
HELOC
Home equity line of credit
HQLA
High Quality Liquid Assets
HTM
Held-to-maturity
IRLC
Interest rate lock commitment
ISDA
International Swaps and Derivatives Association, Inc.
LCR
Liquidity Coverage Ratio
LHFS
Loans held-for-sale
LIBOR
London Interbank Offered Rate
LTV
Loan-to-value
MBS
Mortgage-backed securities
MD&A
Management’s Discussion and Analysis of Financial Condition and Results of Operations
MLI
Merrill Lynch International
MLPCC
Merrill Lynch Professional Clearing Corp
MLPF&S
Merrill Lynch, Pierce, Fenner & Smith Incorporated
MSA
Metropolitan Statistical Area
MSR
Mortgage servicing right
NSFR
Net Stable Funding Ratio
OCI
Other comprehensive income
OREO
Other real estate owned
PCA
Prompt Corrective Action
PPP
Paycheck Protection Program
RMBS
Residential mortgage-backed securities
RWA
Risk-weighted assets
SBA
Small Business Administration
SBLC
Standby letter of credit
SCB
Stress capital buffer
SEC
Securities and Exchange Commission
SLR
Supplementary leverage ratio
SOFR
Secured Overnight Financing Rate
TDR
Troubled debt restructuring
TLAC
Total loss-absorbing capacity
VaR
Value-at-Risk
VIE
Variable interest entity
107Bank of America
Part II. Other Information
Bank of America Corporation and Subsidiaries
Item 1. Legal Proceedings
See Litigation and Regulatory Matters in Note 10 – Commitments and Contingencies to the Consolidated Financial Statements, which is incorporated by reference in this Item 1, for litigation and regulatory disclosure that supplements the disclosure in Note 12 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation’s 2022 Annual Report on Form 10-K.
Item 1A. Risk Factors
There are no material changes from the risk factors set forth under Part 1, Item 1A. Risk Factors of the Corporation’s 2022 Annual Report on Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The table below presents share repurchase activity for the three months ended September 30, 2023. The primary source of funds for cash distributions by the Corporation to its shareholders is dividends received from its banking subsidiaries. Each of the banking subsidiaries is subject to various regulatory policies and requirements relating to the payment of dividends, including requirements to maintain capital above regulatory minimums. All of the Corporation’s preferred stock outstanding has preference over the Corporation’s common stock with respect to payment of dividends.
(Dollars in millions, except per share information; shares in thousands)
Total Common Shares Repurchased (1,2)
Weighted-Average Per Share Price
Total Shares
Purchased as
Part of Publicly
Announced Programs (2)
Remaining Buyback
Authority Amounts (3)
July 1 - 31, 2023
7,805
$
31.96
7,804
$
13,960
August 1 - 31, 2023
20,364
30.81
18,648
13,643
September 1 - 30, 2023
6,081
28.73
6,075
13,553
Three months ended September 30, 2023
34,250
30.70
32,527
(1)Includes 1.7 million shares of the Corporation’s common stock acquired by the Corporation in connection with satisfaction of tax withholding obligations on vested restricted stock or restricted stock units and certain forfeitures and terminations of employment-related awards and for potential re-issuance to certain employees under equity incentive plans.
(2)In October 2021, the Corporation’s Board of Directors (Board) authorized the repurchase of up to $25 billion of common stock over time (October 2021 Authorization). Additionally, the Board authorized repurchases to offset shares awarded under equity-based compensation plans. During the three months ended September 30, 2023, pursuant to the Board’s authorizations, the Corporation repurchased 33 million shares, or $1.0 billion, of its common stock, including repurchases to offset shares awarded under equity-based compensation plans. For more information, see Capital Management - CCAR and Capital Planning in the MD&A on page 22 and Note 11 – Shareholders’ Equity to the Consolidated Financial Statements.
(3)Remaining Buyback Authority Amounts represents the remaining buyback authority of the October 2021 Authorization. Excludes repurchases to offset shares awarded under equity-based compensation plans.
The Corporation did not have any unregistered sales of equity securities during the three months ended September 30, 2023.
Item 5. Other Information
Trading Arrangements
During the fiscal quarter ended September 30, 2023, none of the Corporation’s directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended) adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (in each case, as defined in Item 408(a) of Regulation S-K) for the purchase or sale of the Corporation’s securities.
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
(1)Filed herewith.
(2)Furnished herewith. This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
(3)The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
